<PAGE> 1
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
X ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
- --- OF 1934 (NO FEE REQUIRED)
For the fiscal year ended January 3, 1998
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
- --- ACT OF 1934 (NO FEE REQUIRED)
For the transition period from to
---------------- ---------------
Commission file number 0-1790
RUSSELL CORPORATION
(Exact name of registrant as specified in its charter)
Alabama 63-0180720
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
755 Lee Street
Alexander City, Alabama 35011-0272
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (256) 500-4000
Securities registered pursuant to Section 12(b) of the Act:
Name of Each Exchange
Title of Each Class on Which Registered
------------------- ----------------------
Common Stock, $.01 par value New York Stock Exchange
Pacific Stock Exchange
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months, and (2) has been subject to such filing
requirements for the past 90 days. Yes X No
--- ---
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [ ]
The aggregate market value of Common Stock, par value $.01, held by non-
affiliates of the registrant, as of March 25, 1998, was approximately
$706,472,000.
As of March 25, 1998, there were 36,462,672 shares of Common Stock, $.01
par value outstanding (excluding treasury shares).
<PAGE> 2
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Annual Shareholders Report for the year ended January 3,
1998 are incorporated by reference into Parts II and IV.
Portions of the Proxy Statement for the Annual Meeting of Shareholders to
be held on April 22, 1998 are incorporated by reference into Part III.
<PAGE> 3
PART I
ITEM 1. Business
GENERAL
Russell Corporation (together with its subsidiaries, the "Company") is a
vertically integrated international manufacturer and marketer of activewear,
athletic uniforms, better knit shirts, licensed sports apparel, sports and
casual socks, and a line of yarn-dyed woven fabrics. The Company's manufacturing
operations include the entire process of converting raw fibers into finished
apparel and fabrics. Russell's products are marketed through four sales
divisions--Jerzees (formerly Knit Apparel), Athletic, International, and
Fabrics--as well as through Cross Creek Apparel, Inc. and DeSoto Mills, Inc.,
two wholly owned subsidiaries. Products are marketed to sporting goods dealers,
department and specialty stores, mass merchandisers, wholesale clubs, golf pro
shops, college bookstores, screen printers, distributors, mail-order houses, and
other apparel manufacturers. There was no material change in the nature of the
business conducted by Russell Corporation during 1997.
Of the Company's total revenues, more than ninety percent is derived from
the sale of completed apparel, with the balance from woven fabrics. During the
two previous fiscal years ending January 4, 1997 and December 30, 1995,
completed apparel accounted for more than ninety percent of total revenues.
Foreign and export sales for 1997 were 11.0%. In each of the immediately
preceding two years foreign and export sales were 10.5% and 9.8%, respectively.
One customer, Wal-Mart Stores, Inc. and affiliates, accounted for 18.8 percent
of total revenues in 1997, 17.1 percent in 1996 and 15.1 percent in 1995.
The Company produces athletic uniforms for most recognized sports
activities and for players of all ages and sizes. These products are marketed to
professional, collegiate, high school, and other teams as well as to
individuals. Knit apparel, such as T-shirts, fleece sweatshirts and sweatpants,
pullovers, jackets, and other similar knitted products, is produced for the
general consumer market. Knit product lines also include knit placket shirts,
turtlenecks and other golf apparel. The Company also produces sports and casual
socks including tube, quarter anklet and crew socks for men, women and children.
Woven fabrics are produced and sold to other apparel manufacturers for men's,
women's and children's wear.
The Company's principal manufacturing facilities are located in and around
Alexander City, Alabama. It also operates 38 additional plants in other
communities in Alabama, Florida, Georgia, North Carolina and Virginia. The
Company owns apparel assembly facilities in San Juan Del Rio, Mexico and
Chaloma, Honduras. Warehousing and shipping is conducted in Alexander City, Ft.
Payne and Montgomery, Alabama; Marianna and Miami, Florida; Mt. Airy, North
Carolina; and Columbus, Georgia. The primary manufacturing and distribution
facilities for the International Division are at Russell Corp. UK Limited,
located in and around Livingston, Scotland. The Company also maintains
warehouses in Mexico City and San Juan del Rio, Mexico, Sao Paulo, Brazil and
Melbourne, Australia.
As a vertically integrated operation, the Company converts raw fibers into
finished apparel and fabrics utilizing company-owned spinning mills, knitting
and weaving operations, dyeing and finishing facilities, and cutting and sewing
operations. Generally, the Company produces most of the yarns, other than
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textured and filament yarns, used in the manufacturing process. As a result of
its integrated production process, all functions required to produce finished
apparel and fabrics can be performed by the Company without reliance upon
outside contractors. The Company did, however, obtain 13 percent of its products
for domestic consumption at offshore contractors, owned offshore operations, and
other vendors.
The Company benefits from flexibility in its production scheduling
capability, permitting it to shift product emphasis as markets improve, change
or temporarily decline for particular products. This ability to respond quickly
to market changes has enabled the Company to more effectively manage the
utilization of its manufacturing capacity.
The Company's revenue and income are subject to seasonal variations.
However, due to the time which may elapse between the placement of orders and
shipment of goods, prices may or may not immediately reflect changes in the
Company's cost of raw materials and other costs. Working capital needs may
change with the increase or decrease in inventories or accounts receivable as a
result of a variety of credit terms and time between production and shipments.
Production schedules are based upon current orders, the history of customer
orders, market research, and similar factors. The Company has no meaningful
backlog figures.
The Company does not hold any significant patents, franchises or
concessions. The Company's ability to manufacture and sell licensed apparel
products is dependent upon licenses held by the Company to utilize various
trademarks and tradenames on such apparel. These licenses are subject to
periodic renewal and negotiation and certain minimum payments.
MANUFACTURING
The Company has the capability of converting raw fibers into finished
products in major production complexes which are complemented by several
satellite production facilities in the same geographic areas. The Company
emphasizes the utilization of technological advances and devotes a major portion
of its capital expenditure program to keeping its manufacturing machinery and
equipment modern and efficient with the latest technology.
The total process includes spinning of yarn from cotton or blends of cotton
and man-made fibers such as polyester; fabrication of knit and woven fabrics;
dyeing, bleaching, and otherwise finishing those fabrics; and manufacturing
finished apparel in various cutting and sewing operations. These operations are
discussed below:
Yarn Manufacturing - The spinning of yarns, the process by which fibers of
raw cotton or blends of cotton and man-made fibers are converted into continuous
strands, is a key operation in the manufacturing process. Yarn uniformity and
strength are the principal characteristics which materially affect the
efficiency of subsequent manufacturing processes and the quality of the finished
fabrics or apparel. The Company manufactures a variety of yarn sizes for various
end uses.
The Company purchases synthetic fibers from one principal supplier. There
are approximately four major producers of such fibers in the United States. The
Company purchases cotton, primarily grown in the Southeastern region, from
various
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cotton farmers, gins and merchants. The Company purchases all of its
requirements of filament and textured yarns from other manufacturers. The
Company has experienced no material difficulty in purchasing adequate supplies,
and does not presently anticipate any difficulties in the future. The Company
has no long-term contracts for the supply of raw materials and is, therefore,
subject to market price fluctuations.
Fabrication - The yarns described above are converted by the Company into
cloth or fabrics through the processes of single knitting, supplemented by
smaller operations of weaving, double knitting and warp knitting. These
operations are conducted in three plant locations in Alexander City with
additional locations in Wetumpka, Alabama, and Mt. Airy and North Wilkesboro,
North Carolina. Additional knitting is done on a contract basis to support the
sock line. Similar fabrication facilities in Livingston, Scotland, service
Russell Corp. UK Limited.
Dyeing and Finishing - Fabrics described above are either used in the
production of the Company's own apparel or sold to others. These fabrics are
dyed and finished in company-owned facilities in Alexander City, Wetumpka,
Sylacauga and Ft. Payne, Alabama; Mt. Airy, North Carolina; and Livingston,
Scotland. Yarn-dyed fabrics are dyed in the yarn manufacturing stage. The dyeing
and finishing processes impart and affect the appearance, the hand (feel),
colorfastness, uniformity, shade, and stability (retention of shape and form) of
the fabric.
Cutting and Sewing - The Company's cutting and sewing operations are
currently located in 32 plants in the U.S., two plants in Scotland and plants in
Mexico and Honduras which serve its apparel marketing operations. The Company
employs an engineering staff to assist in the design and development of new
equipment to improve efficiencies and automate production facilities in the
cutting and sewing operations which historically have been characterized by high
labor costs.
The Company places a major emphasis upon maintaining sufficient modern
cutting and sewing equipment, thereby providing flexibility to accommodate
changing patterns, styles and designs of its apparel products.
MARKETING
Jerzees Division - Under the JERZEES(R) label and private labels, this
division designs and markets a wide variety of knitted apparel, including fleece
garments, such as sweatshirts, sweatpants and other fashion items, and
lightweight activewear, such as T-shirts, tank tops, and shorts for children and
adults.
The apparel is sold by a salaried, company-employed salesforce to
distributors, screen printers, mass merchants, craft chains, and other
specialized retail outlets. The Division maintains sales offices in Alexander
City, Alabama; New York, New York; Irving, Texas; and Irvine, California.
Athletic Division - This division produces and markets high-quality
teamwear and activewear through sporting goods dealers, specialty stores,
department stores, sporting goods chains, and major mail-order catalogues. Sales
are made by Company employees.
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The Company has a leading position as a supplier of team uniforms,
providing practice and game uniforms for both professional and amateur
participants of almost every major sport. RUSSELL ATHLETIC(R) is the "official"
supplier of team uniforms for Major League Baseball teams. The Company believes
it is the largest manufacturer of athletic uniforms in the United States.
The bulk of the activities previously conducted in the Licensed Products
Division were assumed by the Athletic Division during 1997. The Company sells
licensed sports activewear under various licenses granted by Major League
Baseball, the National Collegiate Athletic Association and most major colleges
and universities. Certain professional league licenses that did not meet the
Company's expectations have been terminated.
Activewear such as sweatshirts, sweatpants, T-shirts, tank tops, and shorts
are also sold under the RUSSELL ATHLETIC label. The Company merchandises the
RUSSELL ATHLETIC line in product categories such as NuBlend(R), HIGH COTTON(R)
and PRO COTTON(R).
The Company furnishes most of its own yarn and fabric used in this division
and also supplements its requirements with purchases from outside suppliers. The
uniforms are manufactured in a wide variety of styles, fabrics and colors, with
lettering and numerical arrangements available to customer specifications.
International Division - The International Division markets the JERZEES,
RUSSELL ATHLETIC and CROSS CREEK(R) brands throughout various countries outside
the United States and Canada. The Company's major international market is
Europe, where the Company engages in both manufacturing and marketing.
Russell's European production operations located in and around Livingston,
Scotland, include knitting, dyeing and finishing, cutting and sewing, and
distribution facilities. Russell has developed an international sales
infrastructure with offices in Madrid, Spain; Brussels, Belgium; Frankfurt,
Germany; Paris, France; Prague, Czech Republic; Prato, Italy; Hong Kong; Sao
Paulo, Brazil; Mexico City, Mexico; and Melbourne, Australia.
Fabrics Division - The Fabrics Division designs and markets quality woven
fabrics of cotton and blends of cotton and man-made fibers in a wide variety of
patterns, colors and constructions for sale primarily to other manufacturers of
apparel. Most of the woven fabrics are made with dyed yarns to produce fabrics
to meet customer specifications. Sales are made by the Company's own marketing
staff from its Alexander City, Atlanta, and New York sales offices and also by
commission sales representatives located in Dallas, Los Angeles, New York, and
Toronto.
Cross Creek Apparel, Inc. - Cross Creek designs and markets better knit
apparel including placket shirts, turtlenecks and other golf apparel. The CROSS
CREEK PRO COLLECTION(R), designed specifically for golfers, is sold in golf pro
shops and resort areas. The CROSS CREEK retail line is distributed through
department stores and men's specialty shops. The CROSS CREEK COUNTRY COTTONS(R)
and JERZEES lines of placket shirts are marketed through national distributors
to screen printers and embroiderers. The Company holds the exclusive license for
knitted outerwear for the PGA Tour line of golf apparel, which is sold in
department stores, golf shops and resorts. Cross Creek also manufactures private
label apparel for high-end catalogues and other retailers. In addition to
commission agents, Cross Creek maintains a company-employed sales force with
offices in Mt. Airy, North Carolina and New York, New York.
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DeSoto Mills, Inc. - DeSoto Mills is a manufacturer of popularly priced
socks for men, women and children. DeSoto Mills produces and sells sports and
casual socks under the brand names of JERZEES and RUSSELL ATHLETIC. Socks are
also sold to private label customers. Sales are made through a company-employed
sales force principally to discount retailers and the wholesale club markets.
COMPETITION
The textile-apparel industry is keenly competitive, and the Company has
many domestic and foreign competitors, both large textile-apparel companies and
smaller concerns. While the sales of a number of manufacturers are substantially
greater than those of the Company, no single manufacturer dominates the
industry.
EMPLOYEES
As of January 3, 1998, the Company had 17,759 employees. The Company has
never had a strike or work stoppage and considers its relationship with its
employees to be good.
REGULATION
The Company is subject to federal, state, and local laws and regulations
affecting its business, including those promulgated under the Occupational
Safety and Health Act (OSHA), the Consumer Product Safety Act (CPSA), the
Flammable Fabrics Act, the Textile Fiber Product Identification Act, and the
rules and regulations of the Consumer Products Safety Commission (CPSC). The
Company believes that it is in substantial compliance with all applicable
governmental regulations under these statutes. The Company believes it has
complied with all known current environmental requirements and expects no major
additional expenditures in this area in the foreseeable future.
FORWARD-LOOKING INFORMATION
With the exception of historical information, the matters and statements
discussed, made or incorporated by reference in this Annual Report on Form 10-K
constitute forward-looking statements and are discussed, made or incorporated by
reference, as the case may be, pursuant to the safe harbor provisions of the
Private Securities Litigation Reform Act of 1995. Wherever possible, the Company
has identified these "forward-looking" statements (as defined in Section 21E of
the Securities and Exchange Act of 1934) by words such as "anticipates,"
"believes," "estimates," "expects" and similar phrases. In addition, the Company
and its representatives may from time to time make other oral or written
statements that are also forward-looking statements.
Some forward-looking statements concern anticipated sales levels, cost
estimates and resulting earnings that are not necessarily indicative of
subsequent periods due to the mix of future orders, at once orders and product
mix changes, which may vary significantly from year to year or quarter to
quarter. These forward-looking statements are based upon assumptions the Company
believes are reasonable; however, such statements are subject to risks and
uncertainties which
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could cause the Company's actual results, performance and achievements to differ
materially from those expressed in, or implied or contemplated by, these
statements. These risks and uncertainties include, but are not limited to, the
overall level of consumer spending for apparel; the financial strength of the
retail industry; actions by competitors that may impact the Company's business
(including in particular changes in pricing); the existence of excess capacity
in the Company's industry; changes in prices of raw materials used in the
Company's manufacturing processes; the ability of the Company to reduce cost in
more labor-intensive segments of the manufacturing process; the success of
planned advertising, marketing and promotional campaigns and international
activities; changes in customer relationships; the impact of economic changes in
the markets where the Company competes, such as changes in interest rates,
currency exchange rates, inflation rates, recession, and other external economic
and political factors over which the Company has no control; and other risks and
uncertainties discussed or indicated in other documents filed by the Company
with the Securities and Exchange Commission from time to time. The Company
assumes no obligation to update publicly any forward-looking statements, whether
as a result of new information, future events or otherwise.
ITEM 2. Properties
The Company's principal executive offices, manufacturing plants and
research facilities are located in Alexander City, Alabama, with additional
plants in Alabama, Florida, Georgia, North Carolina, Virginia, Mexico, Honduras,
and Scotland. The Company has no material mortgages on any of its real property
or manufacturing machinery except for capitalized lease obligations (see Note 2
of Notes to Consolidated Financial Statements), and believes that all of its
properties are well maintained and suitable for its operations and are currently
fully utilized for such purposes.
The Company utilizes an aggregate of approximately 10,869,000 square feet
of manufacturing, warehousing and office facilities. The following table
summarizes the approximate areas of such facilities:
<TABLE>
<CAPTION>
Approximate
Primary Use Square Feet
----------- -----------
<C> <C>
Spinning 1,536,000
Knitting and Weaving 998,000
Dyeing and Finishing 1,001,000
Cutting and Sewing 2,345,000
Warehousing and Shipping 3,536,000
Retail/Outlet Stores 133,000
Executive Offices, Maintenance
Shops and Research and
Development 732,000
Scotland 405,000
Mexico 79,000
Honduras 104,000
</TABLE>
All presently utilized facilities in the U.S. are owned, except the
sewing plants located in Slocomb, Alabama and downtown Columbia, Alabama; the
regional sales offices; and the majority of the outlet/retail store locations
(see Notes 2 and 9 of Notes to Consolidated Financial Statements).
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ITEM 3. Legal Proceedings
The Company is a party to various lawsuits arising out of the conduct of
its business, none of which, if adversely determined, would have a material
adverse effect upon the Company.
ITEM 4. Submission of Matters to a Vote of Security Holders
None
EXECUTIVE OFFICERS OF THE COMPANY
"Election of Directors" on pages one through four of the Proxy
Statement for the Annual Meeting of Shareholders to be held April 22, 1998 is
incorporated herein by reference.
Additional executive officers who are not directors are as follows:
<TABLE>
<CAPTION>
Officer
Name Age Since Position
---- --- -------- --------
<S> <C> <C> <C>
Fred O. Braswell III 42 1992 Vice President-External
Affairs
Steve R. Forehand 42 1987 Secretary
K. Roger Holliday 39 1988 Treasurer
Thomas R. Johnson, Jr. 55 1989 Executive Vice President-
Manufacturing
W. J. Spires, Jr. 52 1988 President - Cross Creek
Apparel, Inc.
JT Taunton, Jr. 55 1983 Executive Vice President-
Sales and Marketing
Steven S. Williams 38 1996 Asst. Controller,
Asst. Treasurer
Larry E. Workman 54 1987 Controller
</TABLE>
Mr. Braswell, employed by the Company in 1992, was Director of the Alabama
Development Office from 1990 until 1992. Prior to 1990, he was Director of the
Alabama Department of Economic and Community Affairs.
Mr. Forehand, employed by the Company in 1985 as Director of Taxes, served
as Assistant Secretary from 1987 to 1988. Prior to joining the Company, he was
engaged in the private practice of law.
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Mr. Holliday, employed by the Company since 1986, was named Treasurer in
1996. He served as President of the Licensed Products Division from 1994 to
1996, President of the Knit Apparel Division from 1991 until 1994 and Assistant
Treasurer from 1988 to 1991.
Mr. Johnson, employed by the Company since 1989, most recently served as
Vice President, Greige Manufacturing. Prior to joining Russell, he served as
Operations Manager for Eden Yarns, Inc. from 1987 to 1989 and as a Plant Manager
for Avondale Mills from 1984 to 1987. Prior to that, Mr. Johnson was employed by
Chicopee, a division of Johnson & Johnson.
Mr. Spires, employed by the Company in 1969, was elected President, Cross
Creek Apparel, Inc. in 1993. Prior to that, he served from 1988 to 1993 as Vice
President, Services, where he directed the Company's Distribution,
Transportation and Information Services activities. Prior to 1988, Mr. Spires
held several management positions with Russell in both sales and operations.
Mr. Taunton, employed by the Company since 1973, most recently served as
President of the Fabrics Division from 1988 to 1993. Prior to that, he served as
Vice President, Operations and as Operations Manager for the Fabrics Division.
Mr. Williams, employed by the Company since 1986 as a cost accountant,
served as Manager, General Accounting from 1986 to 1996.
Mr. Workman, employed by the Company since 1969 as an accountant, served as
Manager, Cost Accounting from 1970 to 1987.
All executive officers and all other officers of the Company are elected by
the Board of Directors and serve at the pleasure of the Board of Directors.
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PART II
ITEM 5. Market for the Registrant's Common
Stock and Related Security Holder Matters
"Dividend and Market Information" on page 33 and in Note two to
Consolidated Financial Statements on page 27 of the Annual Shareholders Report
for the year ended January 3, 1998 are incorporated herein by reference.
The approximate number of holders of the Company's common stock at March
10, 1998 was 10,100.
ITEM 6. Selected Financial Data
"Ten Year Selected Financial Data" on pages 18 and 19 of the Annual
Shareholders Report for the year ended January 3, 1998 is incorporated herein by
reference with respect to fiscal years 1997, 1996, 1995, 1994 and 1993.
ITEM 7. Management's Discussion and Analysis of
Financial Condition and Results of Operations
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" on pages 20 and 21 of the Annual Shareholders Report for the year
ended January 3, 1998 is incorporated herein by reference.
ITEM 8. Financial Statements and Supplementary Data
The following consolidated financial statements of the registrant and its
subsidiaries, included in the Annual Shareholders Report for the year ended
January 3, 1998 are incorporated herein by reference:
... Consolidated Balance Sheets - January 3, 1998 and January 4, 1997
... Consolidated Statements of Income - Years ended January 3, 1998,
January 4, 1997 and December 30, 1995
... Consolidated Statements of Cash Flows - Years ended January 3, 1998,
January 4, 1997 and December 30, 1995
... Consolidated Statements of Stockholders' Equity - Years ended
January 3, 1998, January 4, 1997 and December 30, 1995
... Notes to Consolidated Financial Statements - Years ended
January 3, 1998, January 4, 1997 and December 30, 1995
... Report of Independent Auditors
ITEM 9. Changes in and Disagreements with
Accountants on Accounting and Financial Disclosure
None
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PART III
ITEM 10. Directors and Executive Officers of the Registrant
"Election of Directors" on pages one through four and "Principal
Shareholders" on pages 21 and 22 of the Proxy Statement for the Annual Meeting
of Shareholders to be held April 22, 1998 is incorporated herein by reference.
"Executive Officers of the Company" on page I-7 of this report is
incorporated herein by reference.
Other significant employees are as follows:
<TABLE>
<CAPTION>
Officer
Name Age Since Position
---- --- ------- --------
<S> <C> <C> <C>
Fletcher D. Adamson 63 1987 Vice President-Research
William P. Dickson, Jr. 57 1974 Vice President-Human Resources
J. Franklin Foy 62 1982 Vice President-Dyeing and Finishing
John E. Frechette 58 1991 Vice President-International
Joseph P. Irwin 40 1994 President-Jerzees Division
D.W. Wachtel 59 1991 President-Athletic Division
</TABLE>
Mr. Adamson, employed by the Company since 1955, was Director, Machine
Research and Development from 1969 to 1987. He began his career in the cutting
operation for the Athletic Division and was a Supervisor in the division's
sewing operations from 1960 to 1969.
Mr. Dickson, employed by the Company in 1974, was previously Industrial
Relations Manager for the Bibb Company.
Mr. Foy, employed by the Company since 1959, was Operating Vice President,
Dyeing and Finishing prior to 1982.
Mr. Frechette, employed by the Company in 1991, operated J.F. & Associates
from 1986 to 1991. J.F. & Associates provided general management and marketing
consulting with focus on the apparel industry. Prior to 1986, he was employed by
Levi Strauss & Company for 15 years, most recently, as Vice President and
General Manager of the Jeans Division U.S.A.
Mr. Irwin, employed by the Company in 1980, was named President of the Knit
Apparel Division (now the Jerzees Division) in 1994. Prior to that he served in
various capacities in the Knit Apparel Division including, Vice President, Sales
from 1993 to 1994; Vice President, Retail/Private Label from 1991 to 1993; and
Vice President, Operations from 1990 to 1991. From 1988 until 1990, he served as
Sales Manager for the Knit Apparel Division.
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Mr. Wachtel, employed by the Company in 1976, was promoted to President of
the Athletic Division in 1991. He formed the Mid-South Regional Office in 1980
and formed the Mid-Southeast Sales Office in 1986. He was General Manager of
Russell Athletic, Inc. in Snellville, Georgia from 1989 to 1990 and Vice
President, Sales in the Athletic Division from 1990 to 1991.
"Compliance with Section 16(a) of the Securities Exchange Act of 1934" on
page 23 of the Proxy Statement for the Annual Meeting of Shareholders to be held
April 22, 1998 is incorporated herein by reference.
ITEM 11. Executive Compensation
"Executive Compensation" on pages 11 through 20 of the Proxy Statement for
the Annual Meeting of Shareholders to be held April 22, 1998 is incorporated
herein by reference.
ITEM 12. Security Ownership of Certain Beneficial Owners and Management
(a) "Principal Shareholders" on pages 21 and 22 of the Proxy Statement for
the Annual Meeting of Shareholders to be held April 22, 1998 is incorporated
herein by reference.
(b) Information concerning security ownership of management set forth in
the Proxy Statement for the Annual Meeting of Shareholders to be held April 22,
1998 under the captions "Security Ownership of Management" on page 22 is
incorporated herein by reference.
(c) There are no arrangements known to the registrant the operation of
which may at a subsequent date result in a change in control of the registrant.
ITEM 13. Certain Relationships and Related Transactions
"Transactions with Management and Others" on page 23 of the Proxy Statement
for the Annual Meeting of Shareholders to be held April 22, 1998 is incorporated
herein by reference.
III-2
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PART IV
ITEM 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K
(a) List of Documents filed as part of this Report:
(1) Financial Statements
All financial statements of the registrant as set forth under
Item 8 of this Report on Form 10-K
(2) Financial Statement Schedule
<TABLE>
<CAPTION>
Schedule Page
Number Description Number
-------- ----------- ------
<S> <C> <C>
II Valuation and Qualifying IV-4
Accounts
</TABLE>
All other financial statements and schedules not listed have been
omitted since the required information is included in the consolidated
financial statements or the notes thereto, or is not applicable or
required.
(3) Exhibits (numbered in accordance with Item 601 of Regulation S-K)
<TABLE>
<CAPTION>
Page Number or
Exhibit Incorporation
Numbers Description by Reference to
------- ----------- ---------------
<S> <C> <C>
(3a) Restated Articles of Exhibit (3a) to
Incorporation Annual Report
on Form 10-K
for year ended
December 30,
1995
(3b) Certificate of Adoption Exhibit (3b) to
of Resolutions by Board Annual Report
of Directors of Russell on Form 10-K
Corporation dated for year ended
October 25, 1989 December 30,
1995
(3c) Bylaws Exhibit (3c) to
Annual Report
on Form 10-K
for year ended
December 30,
1995
(4a) Rights Agreement dated Exhibit 1 to
October 25, 1989 between Form 8-A dated
the Company and First October 30,
Alabama Bank, Montgomery, 1989 Registra-
Alabama tion Statement
No. 1-5822
(4b) Acceptance of Appointment IV-7
as Successor Rights Agent
</TABLE>
IV-1
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<TABLE>
<CAPTION>
Page Number or
Exhibit Incorporation
Numbers Description by Reference to
------- ----------- ---------------
<S> <C> <C>
(10a) Form of Deferred Exhibit (10a) to
Compensation Agreement Annual Report on
with certain officers Form 10-K for
year ended
December 30,
1995
(10b) Fuel supply contract Exhibit 13(c)
with Russell Lands, to Registration
Incorporated dated Statement
May 21, 1975 No. 2-33943
(10c) 1978 Stock Option Plan Exhibit 1 to
Registration
Statement
No. 2-64496
(10d) October 28, 1981 Exhibit (10d) to
Amendment to Stock Annual Report on
Option Plans Form 10-K for
year ended
December 30,
1995
(10e) 1987 Stock Option Plan Exhibit 1 to
Registration
Statement
No. 33-24898
(10f) 1993 Executive Long-Term Exhibit 4(c) to
Incentive Plan Registration
Statement
No. 33-69679
(10g) 1996 Amendment to the 1993 IV-8
Executive Long-Term
Incentive Plan
(11) Computations of Earnings IV-9
per Common Share
(13) 1997 Annual Report to IV-10
Shareholders
(21) List of Significant IV-11
Subsidiaries
(23) Consent of Ernst & Young LLP, IV-12
Independent Auditors
(27.1) Restated Financial Data Schedule
(for SEC use only)
(27.2) Restated Financial Data Schedule
(for SEC use only)
(27.3) Restated Financial Data Schedule
(for SEC use only)
(27.4) Financial Data Schedule
(for SEC use only)
(27.5) Restated Financial Data Schedule
(for SEC use only)
(27.6) Restated Financial Data Schedule
(for SEC use only)
(27.7) Restated Financial Data Schedule
(for SEC use only)
(27.8) Restated Financial Data Schedule
(for SEC use only)
(27.9) Restated Financial Data Schedule
(for SEC use only)
</TABLE>
IV-2
<PAGE> 16
(b) Reports on Form 8-K
No reports on form 8-K were filed during the fourth quarter of the year
ended January 3, 1998.
For the purpose of complying with the amendments to the rules governing
Form S-8 (effective July 13, 1990) under the Securities Act of 1933, the
undersigned registrant hereby undertakes as follows, which undertaking shall be
incorporated by reference into the undertakings contained in Part II of the
registrant's registration statements on Form S-8 numbers 2-64496 and 33-24898:
Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers and
controlling persons of the registrant pursuant to the foregoing provisions,
or otherwise, the registrant has been advised that, in the opinion of the
Securities and Exchange Commission, such indemnification is against public
policy as expressed in the Act and is, therefore, unenforceable. In the
event that a claim for indemnification against such liabilities (other than
the payment by the registrant of expenses incurred or paid by a director,
officer or controlling person of the registrant in successful defense of
any action, suit or proceeding) is asserted by such director, officer or
controlling person in connection with the securities being registered, the
registrant will, unless in the opinion of its counsel the matter has been
settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against
public policy as expressed in the Act and will be governed by the final
adjudication of such issue.
IV-3
<PAGE> 17
SCHEDULE II--VALUATION AND QUALIFYING ACCOUNTS
RUSSELL CORPORATION AND SUBSIDIARIES
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------
BALANCE AT ADDITIONS BALANCE
BEGINNING CHARGED TO COSTS AT END
DESCRIPTION OF PERIOD AND EXPENSES ACQUISITION DEDUCTIONS OF PERIOD
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
YEAR ENDED JANUARY 3, 1998
Allowance for doubtful accounts $ 8,646,733 $ 3,494,827 $ -0- $ 4,791,123(1) $ 7,350,437
Reserve for discounts and returns 1,563,436 10,068,224 -0- 8,449,066(2) 3,182,594
----------- ----------- ---------- ----------- -----------
TOTALS $10,210,169 $13,563,051 -0- $13,240,189 $10,533,031
=========== =========== ========== =========== ===========
YEAR ENDED JANUARY 4, 1997
Allowance for doubtful accounts $ 8,324,594 $ 5,021,777 $ -0- $ 4,699,638(1) $ 8,646,733
Reserve for discounts and returns 2,011,974 6,775,460 -0- 7,223,998(2) 1,563,436
----------- ----------- ---------- ----------- -----------
TOTALS $10,336,568 $11,797,237 $ -0- $11,923,636 $10,210,169
=========== =========== ========== =========== ===========
YEAR ENDED DECEMBER 30, 1995
Allowance for doubtful accounts $ 8,115,122 $ 4,407,505 $ -0- $ 4,198,033(1) $ 8,324,594
Reserve for discounts and returns 2,342,719 9,105,828 -0- 9,436,573(2) 2,011,974
----------- ----------- ---------- ----------- -----------
TOTALS $10,457,841 $13,513,333 $ -0- $13,634,606 $10,336,568
=========== =========== ========== =========== ===========
</TABLE>
(1) Uncollectible accounts written off, net of recoveries.
(2) Discounts and returns allowed customers during the year.
IV-4
<PAGE> 18
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunder duly authorized.
RUSSELL CORPORATION
(Registrant)
Date 3/27/98 By /S/ John C. Adams
------- ---------------------------------
John C. Adams
Chairman, President and CEO
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report is signed below by the following persons on behalf of the registrant
and in the capacities and on the dates indicated.
<TABLE>
<S> <C> <C>
/S/ John C. Adams Chairman, President and CEO 3/27/98
------------------------------ -------
John C. Adams Date
/S/ James D. Nabors Executive Vice President and 3/27/98
------------------------------ Chief Financial Officer, and -------
James D. Nabors Director (Principal Financial Date
Officer)
Director
------------------------------ -------
Herschel M. Bloom Date
/S/ Ronald G. Bruno Director 3/27/98
------------------------------ -------
Ronald G. Bruno Date
/S/ Timothy A. Lewis Director 3/27/98
------------------------------ -------
Timothy A. Lewis Date
Director
------------------------------ -------
C.V. Nalley III Date
</TABLE>
IV-5
<PAGE> 19
<TABLE>
<S> <C> <C>
/S/ Margaret M. Porter 3/27/98
------------------------------ -------
Margaret M. Porter Date
/S/ Benjamin Russell Director 3/27/98
------------------------------ -------
Benjamin Russell Date
/S/ John R. Thomas Director 3/27/98
------------------------------ -------
John R. Thomas Date
Director
------------------------------ -------
John A. White Date
/S/ Larry E. Workman Controller 3/27/98
------------------------------ (Principal Accounting Officer) -------
Larry E. Workman Date
</TABLE>
IV-6
<PAGE> 1
EXHIBIT (4b)
ACCEPTANCE OF APPOINTMENT
AS SUCCESSOR RIGHTS AGENT
IV-7
<PAGE> 2
ACCEPTANCE OF APPOINTMENT AS SUCCESSOR RIGHTS AGENT
The undersigned SunTrust Bank, Atlanta hereby accepts, effective
January 1, 1997, its appointment as successor Rights Agent under the Rights
Agreement as desribed above.
SunTrust Bank, Atlanta
By /s/ A. C. Conn
---------------------------------
Its Group Vice President
---------------------------------
<PAGE> 1
EXHIBIT (10g)
1996 AMENDMENT TO THE 1993 EXECUTIVE
LONG-TERM INCENTIVE PLAN
IV-8
<PAGE> 2
1996 AMENDMENT TO THE 1993 EXECUTIVE LONG-TERM INCENTIVE PLAN
The 1993 Executive Long Term Incentive Plan (the "Plan) is hereby
amended as follows:
A. The following terms and accompanying definitions shall be added to the
Plan under Article 2:
(hh) "Covered Employee" means a Participant who, as of the date of
vesting and/or payout of an Award, as applicable, is one of
the group of "covered employees", as defined in the
regulations promulgated under Section 162(m) of the Code, or
any successor provision thereto.
(ii) "Performance-Based Exception"means the performance-based
exception from the tax deductibility limitations of Section
162(m) of the Code.
B. Section 4.1 of the Plan shall be amended in its entirety to read as
follows:
4.1 NUMBER OF SHARES; LIMITATION ON INDIVIDUAL AWARDS.
(a) (i) Subject to adjustment as provided in Section 4.3 of
the Plan, the total number of Shares available for
grant under the Plan may not exceed two million
(2,000,000). These two million (2,000,000) Shares may
be either authorized but unissued or reacquired or
treasury Shares.
(ii) The following rules will apply for purposes of the
determination of the number of Shares available for
grant under the Plan:
(A) While an Award is outstanding, it shall be
counted against the authorized pool of
Shares, regardless of its vested status.
(B) The grant of an Option or Restricted Stock
shall reduce the Shares available for grant
under the Plan by the number of Shares
subject to such Award.
(C) The grant of a Tandem SARshall reduce the
number of Shares available for grant by the
number of Shares subject to the related
Option (i.e., there is no double counting of
Options and their related Tandem SARs).
(D) The grant of an Affiliated SARshall reduce
the number of Shares available for grant by
the number of Shares subject to the SAR, in
addition to the number of Shares subject to
the related Option.
(E) The grant of a Freestanding SARshall reduce
the number of Shares available for grant by
the number of Freestanding SARs.
(F) The Committee shall in each case determine
the appropriate number of Shares to deduct
from the authorized pool in connection with
the grant of Performance Units and/or
Performance.
(G) To the extent that an Award is settled in
cash rather than in Shares, the authorized
Share pool shall be credited with the
appropriate number of Shares represented by
the cash settlement of the Award, as
determined at the sole discretion of the
Committee (subject to the limitation set
forth in Section 4.2 herein).
1
<PAGE> 3
(b) Unless and until the Committee determines that an Award
granted to a Covered Employee shall not be designed to comply
with the Performance-Based Exception, the following rules
shall apply to grant of such Awards under the Plan:
(i) Stock Options. The maximum aggregate number of Shares
to which Stock Options granted under the Plan
pertain, pursuant to any Awards granted in any one
fiscal year to any one single Participant, shall be
fifty thousand (50,000) Shares.
(ii) SARs. The maximum aggregate number of Shares that may
be granted in the form of SARs, pursuant to any
awards granted in any one fiscal year to any one
single Participant, shall be fifty thousand (50,000)
Shares.
(iii) Restricted Stock. The maximum aggregate number of
Shares that may be granted with respect to Awards
granted in the form of Restricted Stock granted in
any one fiscal year to any one Participant shall be
fifty thousand (50,000)Shares.
(iv) Performance Units/Performance Shares. The maximum
aggregate grant with respect to Awards granted in the
form of Performance Shares or Performance Units
granted to any one Participant with respect to
Performance Periods ending during or concurrently
with the end of any fiscal year of the Company shall
be Performance Shares or Performance Units having, at
the time each such Award is granted and when
aggregated with the value at the time of Award of all
other Awards granted to such Participant with respect
to Performance Periods ending during or concurrently
with the end of such fiscal year, a maximum value
(with respect to Performance Units) or a Fair Market
Value (with respect to Performance Shares) of
$700,000.
Such limits shall constitute separate limits as to each
Participant with respect to each type of Award hereunder.
C. Section 4.3 of the Plan shall be amended in its entirety to read as
follows:
4.3 ADJUSTMENTS IN AUTHORIZED SHARES.
In the event of any merger, reorganization, consolidation,
recapitalization, separation, liquidation, stock dividend, split-up,
Share combination, or other change in the corporate structure of the
Company affecting the Shares, such adjustment shall be made in the
number and class of Shares which may be delivered under the Plan and
the maximum number of Shares which may be granted as Stock Options,
SARs or Restricted Shares in a fiscal year to a Participant, and in the
number and class of and/or price of Shares subject to outstanding
Options, SARs, and Restricted Stock, and in Performance Shares and
Performance Units, granted under the Plan, as may be determined to be
appropriate and equitable by the Committee, in its sole discretion, to
prevent dilution or enlargement of rights; and provided that the number
of Shares subject to any Award shall always be a whole number.
D. New Section 4.4 and 4.5 shall be added to the Plan and shall read in
their entirety as follows:
4.4 PERFORMANCE MEASURES.
Unless and until the Committee proposes for shareholder vote and the
shareholders of the Company approve a change in the general performance
measures set forth in this Section 4.4 the attainment of which may
determine the degree of payout and/or vesting with respect to Awards
granted to Covered Employees which are designed to qualify for the
Performance-Based Exception, the performance measure(s)to be used for
purposes of such grants shall be chosen from among the following:
2
<PAGE> 4
(a) return on equity;
(b) earnings per share;
(c) operating cash flow;
(d) income before taxes;
(e) net income;
(f) return on revenue;
(g) total shareholder return; and
(h) stock price appreciation of the Shares.
The Committee shall have the discretion to adjust the determinations of
the degree of attainment of the pre-established performance goals;
provided, however, the Awards which are designed to qualify for the
Performance-Based Exception, and which are held by Covered Employees,
may not be adjusted upward (the Committee, however, shall retain the
discretion to adjust such Awards to Covered Employees downward).
In the event that applicable tax and/or securities laws change to
permit Committee discretion to alter the governing performance measures
without obtaining shareholder approval of such changes, the Committee
shall have sole discretion to make such changes without obtaining
shareholder approval. In addition, in the event that the Committee
determines that it is advisable to grant Awards which shall not qualify
for the Performance-Based Exception, the Committee may make such grants
without satisfying the requirements of Section 162(m) of the Code.
4.5 COMPLIANCE WITH SECTION 162(M) OF THE CODE.
At all times when Section 162(m) of the Code is applicable, all Awards
granted under this Plan shall comply with the requirements of Section
162(m) of the Code; provided, however, that in the event the Committee
determines that such compliance is not desired with respect to any
Award or Awards available for grant under the plan, then compliance
with Section 162(m) of the Code will not be required. In addition, in
the event that changes are made to Section 162(m) of the Code to permit
flexibility with respect to the Award or Awards available under the
Plan, the Committee may, subject to this Section 4.5, make any
adjustments to such Awards or otherwise it deems appropriate.
E. Section 6.1 of the Plan shall be amended in its entirety to read as
follows:
6.1 GRANT OF OPTIONS.
Subject to the terms and provisions of the Plan, Options may be granted
to Employees at any time and from time to time as shall be determined
by the Committee. Subject to Article 4 of this Plan, the Committee
shall have discretion in determining the number of Shares subject to
Options granted to each Participant. The Committee may grant ISOs,
NQSOs, or a combination thereof.
F. Section 9.1 of the Plan shall be amended in its entirety to read as
follows:
9.1 GRANT OF PERFORMANCE UNITS/PERFORMANCE SHARES.
Subject to the terms of the Plan, Performance Units and Performance
Shares may be granted to eligible Employees at any time and from time
to time, as shall be determined by the Committee. Subject to Article 4
of this Plan the Committee shall have complete discretion in
determining the number of Performance Units and Performance Shares
granted to each Participant.
3
<PAGE> 1
EXHIBIT (11)
COMPUTATIONS OF EARNINGS PER COMMON SHARE
RUSSELL CORPORATION AND SUBSIDIARIES
<TABLE>
<CAPTION>
Year Ended
-----------------------------------------
January 3 January 4 December 30
1998 1997 1995
----------- ----------- -----------
<S> <C> <C> <C>
Basic:
Net Income $54,447,859 $81,575,837 $54,117,229
=========== =========== ===========
Average Common Shares
Outstanding $36,879,901 $38,469,009 $39,097,574
=========== =========== ===========
Earnings per Share-Basic $ 1.48 $ 2.12 $ 1.38
=========== =========== ===========
Diluted:
Net Income $54,447,859 $81,575,837 $54,117,229
=========== =========== ===========
Average Common Shares
Outstanding 36,879,901 38,469,009 39,097,574
Net effect of dilutive
stock options 167,532 183,949 208,981
----------- ----------- -----------
Total $37,047,433 $38,652,958 $39,306,555
=========== =========== ===========
Earnings per Share-Diluted $ 1.47 $ 2.11 $ 1.38
=========== =========== ===========
</TABLE>
IV-9
<PAGE> 1
EXHIBIT (13)
1997 ANNUAL SHAREHOLDERS REPORT
IV-10
<PAGE> 2
Russell Corporation and Subsidiaries
FINANCIAL REVIEW
CONTENTS
Ten-Year Selected Financial Data 18
Management's Discussion and Analysis
of Financial Condition and Results of Operations 20
Consolidated Balance Sheets 22
Consolidated Statements of Income 23
Consolidated Statements of Cash Flows 24
Consolidated Statements of Stockholders' Equity 25
Notes to Consolidated Financial Statements 26
Report of Independent Auditors 32
CASH FLOWS
FROM OPERATIONS WORKING CAPITAL
(dollars in millions) (dollars in millions)
[GRAPH] [GRAPH]
RETURN ON
AVERAGE EQUITY DEBT TO EQUITY
(percent) (percent)
[GRAPH] [GRAPH]
<PAGE> 3
Russell Corporation and Subsidiaries
TEN-YEAR SELECTED FINANCIAL DATA
<TABLE>
<CAPTION>
(Dollars in thousands, except per share data) 1997 1996 1995 1994
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
OPERATIONS
Net sales $1,228,198 $1,244,204 $1,152,633 $1,098,259
Cost of goods sold 857,531 846,166 816,834 739,700
Interest expense 28,165 25,738 21,698 19,434
Income before income taxes(b) 88,352 129,545 87,733 127,585
Income taxes(b) 33,904 47,969 33,616 48,759
Net income applicable to common shares(b) 54,448 81,576 54,117 78,826
- --------------------------------------------------------------------------------------------------------------
FINANCIAL DATA
Depreciation and amortization $ 74,421 $ 72,226 $ 68,010 $ 67,042
Net income plus depreciation and amortization 128,869 153,802 122,127 145,868
Capital expenditures 72,926 114,031 86,556 38,562
Working capital 501,431 412,591 438,070 310,330
Long-term debt and redeemable preferred stock 360,607 255,935 287,878 144,163
Stockholders' equity 665,602 679,823 632,558 628,662
Capital employed 1,026,209 935,758 920,436 772,825
Total assets 1,247,962 1,195,180 1,118,164 1,046,577
- --------------------------------------------------------------------------------------------------------------
COMMON STOCK DATA
Net income-assuming dilution(b) $ 1.47 $ 2.11 $ 1.38 $ 1.96
Dividends .53 .50 .48 .42
Book value 18.25 17.87 16.34 15.84
Price Range:
High 38.38 33.75 31.25 32.63
Low 25.00 23.13 22.00 24.00
- --------------------------------------------------------------------------------------------------------------
FINANCIAL STATISTICS
Net sales times:
Receivables(a) 5.3 5.5 5.3 5.6
Inventories(a) 3.4 3.7 3.8 3.9
Capital employed(a) 1.3 1.3 1.4 1.4
Interest coverage (b) 4.1 6.0 5.0 7.6
Income before income taxes as a percent of sales(b) 7.2% 10.4% 7.6% 11.6%
Net income as a percent of sales(b) 4.4% 6.6% 4.7% 7.2%
Net income as a percent of stockholders' equity (a) (b) 8.2% 12.4% 8.6% 13.0%
- --------------------------------------------------------------------------------------------------------------
OTHER DATA
Net common shares outstanding (000s omitted) 36,463 38,049 38,715 39,689
Approximate number of common shareholders 10,100 12,300 12,300 13,000
- --------------------------------------------------------------------------------------------------------------
</TABLE>
(a) Average of amounts at beginning and end of each fiscal year.
(b) Fiscal 1993 includes a noncash, pre-tax charge of $34,583,080 associated
with the write-down of certain fixed assets and goodwill. The after-tax
impact of this write-down on 1993 earnings was $.56 per common share.
18
<PAGE> 4
<TABLE>
<CAPTION>
1993 1992 1991 1990 1989 1988
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
OPERATIONS
Net sales $ 930,787 $ 899,136 $ 804,585 $ 713,812 $687,954 $531,136
Cost of goods sold 613,325 592,837 553,160 461,281 457,875 344,109
Interest expense 16,948 15,841 18,097 18,885 15,643 8,788
Income before income taxes(b) 80,717 129,507 90,866 109,672 102,728 85,793
Income taxes(b) 31,619 47,269 34,027 41,725 37,994 32,028
Net income applicable to common shares(b) 49,080 81,945 56,279 67,378 64,163 53,728
- -----------------------------------------------------------------------------------------------------------------------------------
FINANCIAL DATA
Depreciation and amortization $ 66,226 $ 60,444 $ 56,594 $ 52,539 $ 45,633 $ 33,368
Net income plus depreciation and amortization 115,306 142,389 112,873 119,917 109,796 87,096
Capital expenditures 83,979 109,161 89,532 113,617 87,410 118,476
Working capital 277,993 285,469 255,392 249,683 267,178 124,263
Long-term debt and redeemable preferred stock 163,334 186,122 185,923 196,857 210,470 90,023
Stockholders' equity 587,651 570,003 502,501 456,352 402,216 345,086
Capital employed 750,985 756,125 688,424 653,209 612,686 435,109
Total assets 1,017,044 964,933 818,220 794,521 720,806 560,969
- -----------------------------------------------------------------------------------------------------------------------------------
COMMON STOCK DATA
Net income-assuming dilution(b) $ 1.19 $ 1.99 $ 1.38 $ 1.65 $ 1.57 $ 1.36
Dividends .39 .34 .32 .32 .28 .23
Book value 14.54 13.97 12.39 11.29 9.95 8.55
Price Range:
High 36.87 40.37 36.25 31.00 26.50 17.75
Low 26.00 27.75 19.75 16.00 15.62 11.37
- -----------------------------------------------------------------------------------------------------------------------------------
FINANCIAL STATISTICS
Net sales times:
Receivables(a) 5.3 5.8 5.9 5.3 5.9 5.6
Inventories(a) 3.7 4.6 4.8 5.1 6.8 6.4
Capital employed(a) 1.2 1.2 1.2 1.1 1.3 1.3
Interest coverage (b) 5.8 9.2 6.0 6.8 7.6 10.8
Income before income taxes as a percent of sales(b) 8.7% 14.4% 11.3% 15.4% 14.9% 16.2%
Net income as a percent of sales(b) 5.3% 9.1% 7.0% 9.4% 9.3% 10.1%
Net income as a percent of stockholders' equity (a) (b) 8.5% 15.3% 11.7% 15.7% 17.2% 17.2%
- --------------------------------------------------------------------------------------------------- -------------------------------
OTHER DATA
Net common shares outstanding (000s omitted) 40,405 40,810 40,569 40,407 40,427 40,360
Approximate number of common shareholders 13,000 13,000 18,000 18,000 18,000 18,000
- --------------------------------------------------------------------------------------------------- -------------------------------
</TABLE>
19
<PAGE> 5
Russell Corporation and Subsidiaries
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
1997 vs 1996
Net sales for the year decreased 1.3% to $1,228,198,000. The most dramatic
decreases were experienced in Licensed Products and in the Jerzees Division.
The deterioration in Licensed Products was consistent throughout the year and
resulted in the reorganization or elimination of parts of that division during
1997. Costs associated with those efforts should be non-recurring and are
intended to improve the profitability of the licensed business in the future.
The Jerzees Division experienced sales declines in the
distributor/screenprint market where price cutting, led by major competitors,
was severe. These pricing pressures not only had the effect of lowering sales,
but also resulted in turmoil and sluggish purchase patterns in that market as
well. Jerzees sales, direct to retail, were up slightly for the year, but did
not meet expectations in the second half, due to overall softness in apparel
sales at retail.
Cross Creek Apparel, Inc. experienced good growth for the year as the Jerzees
brand of placket shirts was expanded in the distributor market. Russell Athletic
had moderate sales increases, generally in line with expectations, while
International and export sales increases slowed and represented 11.0% of the
Company's total sales.
Stable cotton prices, improved manufacturing efficiencies, and ongoing
programs to reduce cost mitigated the impact of lower selling prices on margins.
Margins declined to 30.2% versus the 32.0% experienced in 1996.
The Company utilizes cotton futures contracts to set sales prices which are
generally set six months to a year in advance of selling seasons. Depending upon
market conditions, these contracts may be purchased at the time prices are set.
Purchasing futures contracts not only limits the risk of price increases, but
also limits the Company's ability to benefit from price decreases. At January 3,
1998, the Company had outstanding futures contracts that, when combined with
other contracts and inventory, represented approximately 100% of the Company's
anticipated cotton requirements for 1998.
Selling, general and administrative expenses increased 3.5% during the year,
to 20.5% of sales, versus 19.6% the previous year. Certain costs associated with
the reorganization and elimination of some aspects of the Licensed Products and
International divisions contributed to the increase. Additional expenses
included advertising, particularly in the Jerzees Division, and a continued
emphasis on marketing and customer service, both domestically and
internationally.
The Company utilizes two rate swap agreements in the management of its
interest rate exposure. These agreements effectively convert a portion of the
Company's interest rate exposure from a fixed to a floating rate basis and from
a floating rate to a fixed basis. The effect of these agreements was to lower
the effective interest rate on the Company's long-term debt from 6.83% to 6.64%
and from 6.95% to 6.77% in 1997 and 1996, respectively. Interest expense
increased in 1997 due to increased short-term borrowing, generally, until August
when the Company issued an additional $125 million of long-term debt with a
weighted-average life of seven years at a rate of 6.65%. Proceeds were then used
to reduce short-term debt.
The balance sheet continues to reflect the conservative financial nature of
the Company and its strong financial condition. At the end of 1997, long-term
debt to total capitalization increased with new long-term debt, to 35.1% versus
27.4% at the end of 1996. Inventory growth was held to less than 7%, despite a
fourth quarter sales decline of almost 8%. There was also an 8% increase in
accounts receivable attributable primarily to slow payments from certain
customers. There are no collection problems from those accounts. Current ratios
were 4.4 and 3.2 in 1997 and 1996, respectively, reflecting the impact of the
reduction of short-term debt.
Net income plus non-cash charges of approximately $135 million and the
increase in long-term debt provided the majority of the cash requirements in
1997. This cash was used for capital expenditures, treasury stock repurchases,
payments on long-term debt, payments on short-term debt, working capital, and
dividends. Capital expenditures of $73 million in 1997 bring the five year total
to more than $396 million reflecting the Company's ongoing commitment to
research and development and the modernization of manufacturing, distribution
and customer service systems.
The Company anticipates that 1998 capital expenditures will be approximately
$100 million. The majority of the expenditures will be for further enhancement
primarily of the Company's manufacturing capabilities.
The Company maintains $286 million of informal lines of credit and does not
anticipate issuing any additional long-term debt or equity securities in 1998.
There were no material acquisitions in 1997 or 1996. In 1997 as it did in
1996, the Board of Directors adjusted the
20
<PAGE> 6
stock repurchase authorization upward to two million shares. Purchases of the
Company's Common Stock totaled $51,638,000 in 1997, representing 1,821,201
shares, compared to $26,049,000 representing 932,783 shares in 1996.
The Company has conducted an extensive review of its computer systems,
manufacturing equipment and electronic links with third parties to determine the
extent of modifications required to prevent system date problems associated with
the year 2000. The necessary modifications are well underway and it is
anticipated that all of them will be complete in ample time to avoid any
problems. The cost of these modifications is considered to be immaterial to the
financial statements.
1996 vs 1995
Net sales increased 8% in 1996 to a record $1,244,204,000. The most significant
increases in sales were experienced in DeSoto Mills, Inc., Licensed Products
Division and Cross Creek Apparel, Inc. Growth in core products increased to
solid levels in the fourth quarter. International and export sales growth slowed
in 1996, due to a difficult retail environment in Europe, and represented 10.5%
of sales.
Cotton prices stabilized and returned to more traditional levels during 1996.
As a result, gross margins increased to 32.0% from 29.1% in 1995. Most divisions
of the Company experienced much improved gross margins for the year due to lower
raw material prices and ongoing cost reduction programs.
At January 4, 1997, the Company had outstanding cotton futures contracts
that, when combined with other contracts and inventory, represented
approximately 86% of the Company's anticipated cotton requirements for 1997.
Selling, general and administrative expenses increased 6.3%, but declined to
19.6% of sales from 19.9% the year before. The Company continued to emphasize
marketing and customer service in order to gain market share, domestically and
internationally.
The effect of the previously mentioned interest rate swap agreements was to
lower the effective interest rate on the Company's long-term debt from 6.95% to
6.77% and from 7.34% to 7.07% in 1996 and 1995, respectively. Interest expense
increased in 1996 due to increased short-term borrowings, generally offsetting
principal payments of long-term debt.
The balance sheet continued to reflect the conservative financial nature of
the Company and its strong financial condition. At the end of 1996, long-term
debt to total capitalization was 27.4% versus 31.3% at the end of 1995.
Inventory increased 8%, in line with sales increases. There was a slight
reduction in accounts receivable, year-end 1996 versus 1995. Current ratios were
3.2 and 4.5, respectively, reflecting increased temporary borrowing for 1996.
Net income plus non-cash charges of approximately $149 million and an
increase of short-term borrowings of $55 million provided the majority of the
cash requirements for 1996. This cash was used for capital expenditures,
payments on long-term debt, treasury stock repurchases, working capital and
dividends. Capital expenditures of $114 million in 1996 brings the five-year
total to more than $432 million reflecting the Company's ongoing commitment to
research and development and modernization of manufacturing facilities and
customer services systems.
The Company maintained $238 million of informal lines of credit at year-end
1996.
There were no material acquisitions in 1996 or 1995. In 1996, as it did in
1995, the Board of Directors adjusted the stock repurchase authorization upward
to two million shares. Purchases of the Company's Common Stock totaled
$26,049,000 in 1996, representing 932,783 shares, compared to $30,138,000
representing 1,071,435 shares in 1995.
FORWARD LOOKING
INFORMATION
This annual report, including management's discussion and analysis, contains
certain statements which describe the Company's beliefs concerning future
business conditions and the outlook for the Company based upon currently
available information. Wherever possible, the Company has identified these
"forward looking" statements (as defined in Section 21E of the Securities and
Exchange Act of 1934) by words such as "anticipate," "believes," "estimates,"
"expects" and similar phrases. These forward looking statements are based upon
current assumptions and expectations the Company believes are reasonable,
however, such statements are subject to risks and uncertainties which could
cause the Company's actual results, performance and achievements to differ
materially from those expressed in, or implied by, these statements. These risks
and uncertainties include, but are not limited to, the matters discussed under
the caption "Forward Looking Information" in the Company's Annual Report on Form
10-K for the year ended January 3, 1998, which will be filed by April 3, 1998,
and other risks and uncertainties detailed from time to time in the Company's
SEC filings. Some forward looking statements concern anticipated sales levels,
cost estimates and resulting earnings that are not necessarily indicative of
subsequent periods due to the mix of future orders, at once orders and product
mix changes, which may vary significantly from year to year or quarter to
quarter. The Company assumes no obligation to update publicly any forward
looking statements whether as a result of new information, future events or
otherwise.
21
<PAGE> 7
Russell Corporation and Subsidiaries
CONSOLIDATED BALANCE SHEETS
January 3, 1998 and January 4, 1997
<TABLE>
<CAPTION>
(In thousands, except share data) 1997 1996
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash $ 8,609 $ 7,355
Trade accounts receivable, less allowances of $10,533 in 1997 and $10,210 in 1996 242,988 224,155
Inventories 369,923 346,782
Prepaid expenses and other current assets 20,517 13,334
Future income tax benefits 5,006 8,399
- ---------------------------------------------------------------------------------------------------------------------------
TOTAL CURRENT ASSETS 647,043 600,025
PROPERTY, PLANT AND EQUIPMENT:
Land 10,563 10,683
Buildings 310,053 305,765
Machinery and equipment 833,318 784,081
Construction-in-progress 24,014 22,192
- ---------------------------------------------------------------------------------------------------------------------------
1,177,948 1,122,721
Less allowances for depreciation and amortization (651,835) (595,935)
- ---------------------------------------------------------------------------------------------------------------------------
526,113 526,786
Other assets 74,806 68,369
- ---------------------------------------------------------------------------------------------------------------------------
$ 1,247,962 $ 1,195,180
===========================================================================================================================
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Short-term debt $ 39,256 $ 63,256
Accounts payable and accrued expenses:
Trade accounts 41,425 40,941
Employee compensation 22,885 22,741
Other 20,568 18,515
- ---------------------------------------------------------------------------------------------------------------------------
84,878 82,197
Income taxes -- 10,038
Current maturities of long-term debt and capital lease obligations 21,478 31,943
- ---------------------------------------------------------------------------------------------------------------------------
TOTAL CURRENT LIABILITIES 145,612 187,434
LONG-TERM DEBT AND CAPITAL LEASE OBLIGATIONS, LESS CURRENT MATURITIES 360,607 255,935
DEFERRED LIABILITIES:
Income taxes 49,810 46,218
Pension and other 26,331 25,770
- ---------------------------------------------------------------------------------------------------------------------------
76,141 71,988
COMMITMENTS AND CONTINGENCIES -- --
STOCKHOLDERS' EQUITY:
Common Stock, par value $.01 per share; authorized 150,000,000 shares,
issued 41,419,958 shares 414 414
Paid-in capital 48,654 50,200
Retained earnings 761,428 726,492
Treasury stock (1997 - 4,957,336 and 1996 - 3,370,885 shares) (140,170) (95,057)
Currency translation adjustment (4,724) (2,226)
- ---------------------------------------------------------------------------------------------------------------------------
665,602 679,823
- ---------------------------------------------------------------------------------------------------------------------------
$ 1,247,962 $ 1,195,180
===========================================================================================================================
</TABLE>
See notes to consolidated financial statements.
22
<PAGE> 8
Russell Corporation and Subsidiaries
CONSOLIDATED STATEMENTS OF INCOME
Years ended January 3, 1998, January 4, 1997 and December 30, 1995
<TABLE>
<CAPTION>
(In thousands, except per share data) 1997 1996 1995
- --------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
NET SALES $ 1,228,198 1,244,204 $ 1,152,633
Cost of goods sold 857,531 846,166 816,834
- --------------------------------------------------------------------------------------------------------
370,667 398,038 335,799
Selling, general and administrative expenses 252,387 243,759 229,347
- --------------------------------------------------------------------------------------------------------
118,280 154,279 106,452
OTHER DEDUCTIONS (INCOME):
Interest expense 28,165 25,738 21,698
Other - net 1,763 (1,004) (2,979)
- --------------------------------------------------------------------------------------------------------
29,928 24,734 18,719
- --------------------------------------------------------------------------------------------------------
INCOME BEFORE INCOME TAXES 88,352 129,545 87,733
PROVISION FOR INCOME TAXES:
Currently payable 27,688 53,259 35,416
Deferred 6,216 (5,290) (1,800)
- --------------------------------------------------------------------------------------------------------
33,904 47,969 33,616
- --------------------------------------------------------------------------------------------------------
NET INCOME $ 54,448 $ 81,576 $ 54,117
========================================================================================================
NET INCOME PER COMMON SHARE:
Basic $ 1.48 $ 2.12 $ 1.38
Diluted $ 1.47 $ 2.11 $ 1.38
AVERAGE SHARES OUTSTANDING:
Basic 36,879,901 38,469,009 39,097,574
Diluted 37,047,433 38,652,958 39,306,555
</TABLE>
See notes to consolidated financial statements.
23
<PAGE> 9
Russell Corporation and Subsidiaries
CONSOLIDATED STATEMENTS OF CASH FLOWS
Years ended January 3, 1998, January 4, 1997 and December 30, 1995
<TABLE>
<CAPTION>
(In thousands) 1997 1996 1995
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Operating activities
Net income $ 54,448 $ 81,576 $ 54,117
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization 74,421 72,226 68,010
Deferred income taxes 6,216 (5,290) (1,800)
(Gain) loss on sale of property, plant and equipment (438) 200 560
Changes in assets and liabilities:
Trade accounts receivable (19,532) 2,237 (13,604)
Inventories (25,087) (22,458) (43,414)
Prepaid expenses and other current assets 1,705 (6,045) 175
Other assets (9,918) 175 (4,872)
Accounts payable and accrued expenses 3,942 208 6,027
Income taxes (20,113) 3,240 (31)
Pension and other deferred liabilities 2,050 6,019 (1,103)
- ----------------------------------------------------------------------------------------------------------------------------------
NET CASH PROVIDED BY OPERATING ACTIVITIES 67,694 132,088 64,065
Investing activities
Purchase of property, plant and equipment (72,926) (114,031) (86,556)
Proceeds from sale of property, plant and equipment 2,380 1,280 5,984
- ----------------------------------------------------------------------------------------------------------------------------------
NET CASH USED IN INVESTING ACTIVITIES (70,546) (112,751) (80,572)
Financing activities
Short-term borrowings -- 54,846 --
Payments on short-term debt (23,736) -- (90,493)
Payments on long-term debt (30,793) (31,282) (19,475)
Long-term borrowings 125,000 -- 175,000
Dividends on common stock (19,512) (19,247) (18,790)
Distribution of treasury stock 4,979 5,165 1,252
Cost of common stock for treasury (51,638) (26,049) (30,138)
- ----------------------------------------------------------------------------------------------------------------------------------
NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES 4,300 (16,567) 17,356
Effect of exchange rate changes on cash (194) 100 (505)
- ----------------------------------------------------------------------------------------------------------------------------------
Net increase in cash 1,254 2,870 344
Cash balance at beginning of year 7,355 4,485 4,141
- ----------------------------------------------------------------------------------------------------------------------------------
CASH BALANCE AT END OF YEAR $ 8,609 $ 7,355 $ 4,485
==================================================================================================================================
</TABLE>
See notes to consolidated financial statements.
24
<PAGE> 10
Russell Corporation and Subsidiaries
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
Years ended January 3, 1998, January 4, 1997 and December 30, 1995
<TABLE>
<CAPTION>
(In thousands, except share data) 1997 1996 1995
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Common stock
BALANCE AT BEGINNING AND END OF YEAR $ 414 $ 414 $ 414
======================================================================================================================
Paid-in capital
Balance at beginning of year $ 50,200 $ 52,405 $ 53,511
Exercise of stock options (1,546) (2,205) (1,106)
- ----------------------------------------------------------------------------------------------------------------------
BALANCE AT END OF YEAR $ 48,654 $ 50,200 $ 52,405
======================================================================================================================
Retained earnings
Balance at beginning of year $726,492 $664,163 $ 628,836
Net income for the year 54,448 81,576 54,117
Cash dividends - Common Stock
(1997 - $.53; 1996 - $.50; 1995 - $.48) (19,512) (19,247) (18,790)
- ----------------------------------------------------------------------------------------------------------------------
BALANCE AT END OF YEAR $761,428 $726,492 $ 664,163
======================================================================================================================
Treasury stock
Balance at beginning of year $ 95,057 $ 76,378 $ 48,598
Cost of shares acquired
(1997 - 1,821,201; 1996 - 932,783; 1995 - 1,071,435) 51,638 26,049 30,138
Shares distributed
(1997 - 234,750; 1996 - 266,435; 1995 - 97,787) (6,525) (7,370) (2,358)
- ----------------------------------------------------------------------------------------------------------------------
BALANCE AT END OF YEAR $140,170 $ 95,057 $ 76,378
======================================================================================================================
Currency translation adjustment
Balance at beginning of year $ (2,226) $ (8,046) $ (5,501)
Translation (loss) gain (2,498) 5,820 (2,545)
- ----------------------------------------------------------------------------------------------------------------------
BALANCE AT END OF YEAR $ (4,724) $ (2,226) $ (8,046)
======================================================================================================================
</TABLE>
See notes to consolidated financial statements.
25
<PAGE> 11
Russell Corporation and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years ended January 3, 1998, January 4, 1997 and December 30, 1995
NOTE ONE
DESCRIPTION OF BUSINESS AND
SIGNIFICANT ACCOUNTING POLICIES
Russell Corporation is a vertically integrated international designer,
manufacturer and marketer of activewear, athletic uniforms, better knit shirts,
leisure apparel, licensed sports apparel, sports and casual socks, and a line of
yarn-dyed woven fabrics. Apparel products are marketed to sporting goods
dealers, department and specialty stores, mass merchants, wholesale clubs, golf
pro shops, college bookstores, screen printers, distributors, mail order
catalogs and other apparel manufacturers.
PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the accounts of Russell
Corporation and its subsidiaries after the elimination of intercompany accounts
and transactions.
USE OF ESTIMATES
The preparation of the financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the amounts reported in the financial statements and
accompanying notes. Actual results could differ from those estimates.
INVENTORIES
Inventories of finished goods, work-in-process and raw materials are carried at
the lower of cost or market, with cost for a substantial portion of inventories
determined under the Last-In, First-Out (LIFO) method. Certain inventories are
carried under the First-In, First-Out (FIFO) method, or the average cost method,
and were valued at approximately $79,000,000 in 1997 and $69,000,000 in 1996.
Inventories are summarized as follows:
<TABLE>
<CAPTION>
(In thousands) 1997 1996
- ------------------------------------------------------------------------------
<S> <C> <C>
Finished goods $ 286,254 $ 280,368
Work-in-process 52,498 45,562
Raw materials and supplies 65,476 53,885
- ------------------------------------------------------------------------------
404,228 379,815
Less LIFO reserve 34,305 33,033
- ------------------------------------------------------------------------------
$ 369,923 $ 346,782
==============================================================================
</TABLE>
PROPERTY, PLANT AND EQUIPMENT
Provision for depreciation of the principal items of property, plant and
equipment (recorded at cost), including those items held under capital lease
agreements, has been computed generally on the straight-line method at rates
based upon their estimated useful lives.
OTHER ASSETS
Included in other assets is goodwill of approximately $33,100,000 and
$35,000,000, which is net of accumulated amortization of $10,500,000 and
$8,600,000 at January 3, 1998 and January 4, 1997, respectively. Goodwill is
being amortized over fifteen to twenty-five years on a straight-line basis. The
carrying value of goodwill is reviewed if the facts and circumstances suggest
that it may be impaired. If this review indicates that goodwill will not be
recoverable based upon the undiscounted expected future cash flows over the
remaining amortization period, the Company's carrying value of the goodwill is
reduced by the excess of the carrying value over the fair value of the entity
acquired.
LONG-LIVED ASSETS
The Company records impairment losses on long-lived assets under the provisions
of Financial Accounting Standards Board (FASB) Statement 121. When events and
circumstances indicate that assets may be impaired, and the undiscounted cash
flows estimated to be generated from those assets are less than the carrying
value of such assets, the Company records an impairment loss equal to the excess
of the carrying value over the asset's fair value. There were no material
impairment losses recorded in 1997, 1996 or 1995.
INCOME TAXES
The Company accounts for income taxes under the provisions of FASB Statement
109, "Accounting for Income Taxes." Under Statement 109, deferred tax assets and
liabilities are determined based upon differences between financial reporting
and tax bases of assets and liabilities and are measured at the enacted tax
rates and laws that will be in effect when the differences are expected to
reverse.
ADVERTISING, MARKETING AND PROMOTIONS EXPENSE
The cost of advertising, marketing and promotions is expensed as incurred. The
Company incurred $41,099,000, $36,454,000 and $40,281,000 in such costs during
1997, 1996 and 1995, respectively.
POSTRETIREMENT BENEFITS OTHER THAN PENSIONS
Postretirement benefits are recorded under the provisions of FASB Statement 106,
"Employers' Accounting for Postretirement Benefits Other Than Pensions." The
cost of such benefits is accrued over the service lives of the employees
expected to be eligible to receive such benefits.
26
<PAGE> 12
STOCK-BASED COMPENSATION
The Company issues awards under its incentive compensation plans as described in
Note 7. These stock options and awards are accounted for in accordance with
Accounting Principles Board (APB) Opinion No. 25, "Accounting for Stock Issued
to Employees."
CONCENTRATIONS OF CREDIT RISK AND FINANCIAL INSTRUMENTS
Financial instruments which subject the Company to credit risk are primarily
trade accounts receivable. Concentrations of credit risk with respect to trade
accounts receivable are limited due to the large number and diversity of
customers comprising the Company's customer base. Management believes that any
risk associated with trade accounts receivable is adequately provided for in the
allowance for doubtful accounts.
Sales to a major customer, and its affiliates, represented 18.8%, 17.1% and
15.1% of the Company's net sales for the years ended January 3, 1998, January 4,
1997 and December 30, 1995, respectively. Accounts receivable from this customer
represented 27.9% and 23.7% of the Company's net accounts receivable at January
3, 1998 and January 4, 1997, respectively.
The Company periodically enters into futures contracts as hedges for its
purchases of cotton inventory. Gains and losses on these hedges are deferred and
reflected in cost of sales as such inventory is sold. The Company also
periodically utilizes forward purchase contracts in its international operations
to limit the currency risks associated with purchase obligations. The effects of
movements in currency exchange rates on these instruments are recognized in the
period in which the purchase obligations are satisfied. There were no forward
purchase contracts outstanding at January 3, 1998 (Note 4).
The Company utilizes two interest rate swap agreements in the management of
interest rate exposure on long-term debt. The differential to be received, or
paid, under the agreements is accrued as interest rates change and recorded as
an adjustment to interest expense. The related amount payable to, or receivable
from, the counterparties to the agreements is included in other liabilities or
assets. The Company believes that the possibility of credit losses associated
with these agreements, resulting from third-party non-performance, is remote
(Note 4).
EARNINGS PER COMMON SHARE
At January 3, 1998, the Company adopted FASB Statement No. 128, "Earnings Per
Share." In accordance with Statement 128, basic earnings per share is computed
by using the average number of common shares outstanding during the period
without consideration of common stock equivalents. Diluted earnings per share is
computed by using the average number of common shares outstanding plus common
stock equivalents (employee stock options). Prior period earnings per share has
been restated in accordance with Statement 128.
FISCAL YEAR
The Company's fiscal year ends on the Saturday nearest to January 1, which
periodically results in a fiscal year of 53 weeks, as was the case for 1996.
Fiscal years 1997, 1996 and 1995 ended on January 3, 1998, January 4, 1997 and
December 30, 1995, respectively.
NEW ACCOUNTING PRONOUNCEMENT
During 1997, the FASB issued Statement No. 130, "Reporting Comprehensive
Income," effective for fiscal years beginning after December 15, 1997. Statement
No. 130 requires the reporting of all items to be recognized as comprehensive
income in a format of equal prominence with current financial statement
presentation. The Company will comply with the requirements of the statement for
financial information presented for fiscal year 1998.
NOTE TWO
LONG-TERM DEBT AND CAPITAL LEASE OBLIGATIONS
Long-term debt and capital lease obligations include the following:
<TABLE>
<CAPTION>
(In thousands) 1997 1996
- ---------------------------------------------------------------------------
<S> <C> <C>
Notes payable to financial institutions:
6.72% notes due annually through 2002 $ 53,571 $ 64,286
8.83% notes due annually through 1999 21,500 32,200
8.01% notes -- 9,000
6.95% notes due through 1998 64 142
6.65% notes due annually 2001
through 2007 125,000 --
6.78% notes due annually 2003
through 2008 100,000 100,000
Variable rate (6.20% at January 3, 1998)
note due semi-annually 1999
through 2005 75,000 75,000
Capital lease obligations (variable rate,
4.3% at year-end) due 2017 6,950 7,250
- ---------------------------------------------------------------------------
382,085 287,878
Less current maturities 21,478 31,943
- ---------------------------------------------------------------------------
$360,607 $255,935
- ---------------------------------------------------------------------------
</TABLE>
The notes are unsecured and contain restrictions on the payment of dividends;
incurrence of indebtedness, liens or leases; acquisition of investments;
retirement of capital stock; and the maintenance of working capital. At January
3, 1998, $80,364,472 of retained earnings was unrestricted for payment of
dividends.
The capital lease obligations relate to land, buildings and machinery and
equipment financed primarily by industrial revenue bonds. The property
collateralized under the capital lease obligations is included in property,
plant and equipment with a net carrying value of $5,484,000 and $5,903,000 at
January 3, 1998 and January 4, 1997, respectively.
The following summarizes the maturities of long-term debt and capital lease
obligations: 1998 - $21,478,000; 1999 - $32,214,000; 2000 - $21,414,000; 2001 -
$39,271,000; 2002 - $39,272,000; and thereafter $228,436,000.
27
<PAGE> 13
Russell Corporation and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years ended January 3, 1998, January 4, 1997 and December 30, 1995
NOTE THREE
SHORT-TERM DEBT
The Company may borrow up to approximately $286 million under informal line of
credit arrangements with six banks, on such terms as the Company and the banks
may mutually agree. Generally, the arrangements may be canceled by either party
at any time. At January 3, 1998, amounts outstanding under the line of credit
arrangements totaled $39.3 million. The average interest rates of bank
borrowings during 1997, 1996 and 1995 were 6.0%, 5.8% and 6.3%, respectively.
The weighted-average interest rates of bank borrowings outstanding at January 3,
1998, January 4, 1997 and December 30, 1995 were 6.8%, 5.9% and 7.3%,
respectively.
NOTE FOUR
FINANCIAL INSTRUMENTS
COTTON FUTURES
The Company utilizes commodity futures contracts in connection with estimating
product sales prices in advance of the selling seasons. These transactions
effectively limit the Company's risk associated with future cotton price
increases as well as the benefits of future price decreases. At January 3, 1998,
the Company had outstanding futures contracts that, when combined with other
contracts and inventories, represented approximately 100% of its anticipated
1998 cotton requirements.
INTEREST RATE SWAP AGREEMENTS
The Company utilizes two interest rate swap agreements in the management of
interest rate exposure on long-term debt. The Company entered into a fixed to
floating rate swap agreement in 1992. Under this agreement, which expires August
31, 2002, the Company receives a fixed rate payment of 6.14% on approximately
$54 million and pays a floating rate based upon LIBOR, as determined at
six-month intervals.
In 1995, the Company entered into a floating to fixed rate swap agreement.
Under this agreement, which expires June 30, 2005, the Company receives a
variable rate based upon LIBOR plus .29%, as determined quarterly, and pays a
fixed rate of 6.67% on $75 million.
These agreements, when combined, effectively lowered the weighted-average
interest rate on the Company's long-term debt from 6.83% to 6.64% and from 6.95%
to 6.77% in 1997 and 1996, respectively. The Company believes that future
changes in interest rates will not have a material impact on the Company's
consolidated financial position or results of operations. The fair value of the
swap agreements, as indicated below, is the estimated termination value of the
agreements at the balance sheet date and may not be indicative of the current
termination values. Any gain or loss on the agreements will be recognized when
realized.
OTHER FINANCIAL INSTRUMENTS
At January 3, 1998 and January 4, 1997, the carrying value of financial
instruments such as cash, trade accounts receivable and payables approximated
their fair values, based upon the short-term maturities of these instruments.
The fair value of the Company's long-term debt is estimated using discounted
cash flow analyses, based upon the Company's current incremental borrowing rates
for similar types of borrowing arrangements. The following table summarizes fair
value information for the Company's long-term debt and interest rate swap
agreements:
<TABLE>
<CAPTION>
1997 1996
- --------------------------------------------------------------------------------
Carrying Fair Carrying Fair
(In thousands) Value Value Value Value
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Long-term debt $382,085 $ 392,780 $287,878 $284,074
Interest-rate swap
agreement
terminating
August 31, 2002 3,388 4,958 2,216 3,013
Interest-rate swap
agreement
terminating
June 30, 2005 -- (852) -- 445
</TABLE>
NOTE FIVE
EMPLOYEE RETIREMENT BENEFITS
The Company has a qualified noncontributory pension plan (Retirement Plan)
covering substantially all of its United States employees and a savings plan
that is qualified under Section 401(k) of the Internal Revenue Code (Savings
Plan).
Benefits for the Retirement Plan are based upon years of service and the
employee's highest consecutive five years of compensation during the last ten
years of employment. The Company's funding policy for the Retirement Plan is to
contribute annually the maximum amount that can be deducted for federal income
tax purposes. Contributions are intended to provide not only for benefits
attributed to service
28
<PAGE> 14
to date, but also for those expected to be earned in the future. Net pension
cost for the Retirement Plan included the following components:
<TABLE>
<CAPTION>
(In thousands) 1997 1996 1995
- --------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Service cost $ 5,916 $ 5,838 $ 5,134
Interest cost 7,800 7,408 7,106
Actual return on plan assets (16,086) (10,705) (10,496)
Net amortization and deferral 6,542 1,416 1,846
- --------------------------------------------------------------------------------------------------
Net pension cost $ 4,172 $ 3,957 $ 3,590
==================================================================================================
</TABLE>
The Retirement Plan's funded status is as follows:
<TABLE>
<CAPTION>
(In thousands) 1997 1996
- --------------------------------------------------------------------------------------------------
<S> <C> <C>
Actuarial present value of
benefit obligations:
Accumulated benefit obligation
including vested benefits of
$86,563 and $81,432, respectively $ (91,093) $ (85,753)
- --------------------------------------------------------------------------------------------------
Projected benefit obligation $(114,966) $(112,359)
Plan assets at fair value 118,063 103,609
- --------------------------------------------------------------------------------------------------
Overfunded (underfunded) status 3,097 (8,750)
Unrecognized net gain (19,882) (7,166)
Unrecognized prior service cost 3,758 4,121
Unrecognized net transition asset (4,378) (5,056)
- --------------------------------------------------------------------------------------------------
Accrued pension expense $ (17,405) $ (16,851)
==================================================================================================
</TABLE>
Plan assets at January 3, 1998, are invested primarily in U.S. government
securities and listed corporate bonds and stocks, including 600,960 shares of
the Company's Common Stock having a market value of $16,376,000. Dividends paid
to the plan by the Company were $319,000 and $300,000 for 1997 and 1996,
respectively. The weighted-average discount rate used in determining the
actuarial present value of the projected benefit obligation was 7.25% in 1997,
1996 and 1995. The rates of increase in future compensation levels were 3.75% in
1997 and 4.00% in 1996 and 1995. The expected long-term rate of return on plan
assets was 9.00% in 1997, 1996 and 1995.
During 1995, the Company implemented the Savings Plan which allows
substantially all of the Company's United States employees to defer portions of
their annual compensation. The Company provides additional matching and
discretionary contributions. Compensation expense associated with this plan was
$1,417,000, $1,322,000 and $1,456,000 for 1997, 1996 and 1995, respectively.
NOTE SIX
INCOME TAXES
Foreign operations contributed approximately $(1,989,000), $900,000 and
$8,000,000 to the Company's income before income taxes in 1997, 1996 and 1995,
respectively. Significant components of the provision for income taxes are as
follows:
<TABLE>
<CAPTION>
1997 1996 1995
- -------------------------------------------------------------------------------------------
Currently Currently Currently
(In thousands) Payable Deferred Payable Deferred Payable Deferred
- -------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Federal $24,136 $6,160 $47,860 $(4,994) $29,580 $(1,596)
State 3,233 825 5,709 (596) 3,788 (204)
Foreign 319 (769) (310) 300 2,048 --
- -------------------------------------------------------------------------------------------
Totals $27,688 $6,216 $53,259 $(5,290) $35,416 $(1,800)
===========================================================================================
</TABLE>
The reconciliation of income tax computed by applying the statutory federal
income tax rate of 35% to income before income taxes to total income tax expense
is as follows:
<TABLE>
<CAPTION>
(In thousands) 1997 1996 1995
- -------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Taxes at statutory rate on
income before income taxes $30,923 $45,341 $30,707
State income taxes, net of
federal income tax benefit 2,637 3,324 2,329
Goodwill 425 425 425
Other-net (81) (1,121) 155
- -------------------------------------------------------------------------------------------
$33,904 $47,969 $33,616
===========================================================================================
</TABLE>
Deferred income taxes reflect the net tax effects of temporary differences
between the carrying amounts of assets and liabilities for financial reporting
purposes and the amounts used for income tax purposes. Significant components of
the Company's deferred tax liabilities and assets as of January 3, 1998 and
January 4, 1997, are as follows:
<TABLE>
<CAPTION>
(In thousands) 1997 1996
- --------------------------------------------------------------------------------------------
<S> <C> <C>
Deferred tax liabilities:
Property, plant and equipment $57,266 $53,434
Accounts receivable 1,594 --
Other 1,548 965
- -------------------------------------------------------------------------------------------
Total deferred tax liabilities 60,408 54,399
Deferred tax assets:
Pension and postemployment obligations 8,555 8,340
Inventory 5,416 4,024
Accounts receivable -- 2,883
Employee benefits 1,633 1,333
Capital loss and credit carryforwards 233 282
- -------------------------------------------------------------------------------------------
Total deferred tax assets 15,837 16,862
Valuation allowance for deferred tax assets (233) (282)
- -------------------------------------------------------------------------------------------
Net deferred tax assets 15,604 16,580
- -------------------------------------------------------------------------------------------
Net deferred tax liabilities $44,804 $37,819
===========================================================================================
</TABLE>
29
<PAGE> 15
Russell Corporation and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years ended January 3, 1998, January 4, 1997 and December 30, 1995
NOTE SEVEN
STOCK RIGHTS PLAN AND EXECUTIVE
LONG-TERM INCENTIVE PLAN
On October 25, 1989, the Board of Directors declared a dividend of one Right for
each share of Common Stock outstanding, which, when exercisable, entitles the
holder to purchase a unit of one one-hundredth share of Series A Junior
Participating Preferred Stock, par value $.01, at a purchase price of $85. Upon
certain events relating to the acquisition of, or right to acquire, beneficial
ownership of 20% or more of the Company's outstanding Common Stock by a
third-party, or a change in control of the Company, the Rights entitle the
holder to acquire, after the Rights are no longer redeemable by the Company,
shares of Common Stock for each Right held at a significant discount to market.
The Rights will expire on October 25, 1999, unless redeemed earlier by the
Company at $.01 per Right under certain circumstances.
During 1993, the Company's shareholders approved the 1993 Executive Long-Term
Incentive Plan (1993 Plan). Persons eligible to participate in the 1993 Plan
include all officers and key employees of the Company and its subsidiaries. The
1993 Plan permits the issuance of awards in several forms including restricted
stock, incentive stock options, non-qualified stock options, stock appreciation
rights (SARs) and performance shares and performance unit awards.
Under the 1993 Plan and predecessor stock option plans, a total of 2,276,410
shares of Common Stock are reserved for issuance. The options are granted at a
price equal to the stock's fair market value at the date of grant. The options
are exercisable two years after the date of grant and expire ten years after the
date of grant. The following table summarizes the status of options under the
1993 Plan and predecessor plans:
<TABLE>
<CAPTION>
1997 1996 1995
- ----------------------------------------------------------------------------------
Weighted- Weighted- Weighted-
Number of Average Number of Average Number of Average
Shares Price Shares Price Shares Price
- ----------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Outstanding 1,414,950 $28.21 1,452,550 $26.55 1,425,730 $24.93
Exercisable 891,250 $27.71 887,350 $25.28 934,730 $22.88
Granted 277,700 $30.88 299,600 $27.25 278,600 $30.00
Exercised 237,650 $21.20 266,280 $18.92 97,787 $16.35
Canceled 77,650 $28.20 6,500 $16.81 89,510 $27.15
Available for
future grants 861,460 1,061,510 1,354,610
</TABLE>
At January 3, 1998, options outstanding were exercisable at prices which
ranged from $22.06 to $30.00 per share and had a weighted-average remaining
contractual life of seven years. SARs which have been awarded to officers and
management of the Company amount to 2,552,100 shares at January 3, 1998. SARs
permit the optionee to surrender an exercisable option for a cash or Company
stock award equal to the difference between the market price and option price
when the right is exercised, provided certain performance measures are achieved.
No compensation expense with respect to these rights was earned during 1997,
1996 or 1995.
Statement of Financial Accounting Standards No. 123, "Accounting for
Stock-Based Compensation," provides an alternative to APB Opinion No. 25 in
accounting for stock-based compensation issued to employees. The Statement
allows for a fair value based method of accounting for employee stock options
and similar equity instruments. However, for companies that continue to follow
the accounting provisions of APB Opinion No. 25, Statement No. 123 requires
disclosure of the pro forma effect on net income and earnings per share as if
the accounting provisions of the fair value method of the Statement had been
employed. For the purposes of this disclosure, the fair value of the Company's
employee stock options was estimated at the date of grant using an option
pricing model. The fair values derived for options granted during 1997, 1996 and
1995 were $9.69, $9.32 and $10.27, respectively, using the following
weighted-average assumptions:
<TABLE>
<CAPTION>
1997 1996 1995
- ---------------------------------------------------------------------------------
<S> <C> <C> <C>
Risk-free interest rate 5.4% 6.5% 6.5%
Dividend yield 1.8% 1.7% 1.7%
Volatility factor .186 .159 .159
Weighted-average expected
life of options 10 years 10 years 10 years
</TABLE>
For purposes of pro forma disclosures, the estimated fair value of the
options is amortized to expense over the options' vesting period. The Company's
pro forma information follows:
<TABLE>
<CAPTION>
(In thousands, except per share data) 1997 1996 1995
- ---------------------------------------------------------------------------------
<S> <C> <C> <C>
Pro forma net income $ 52,790 $ 78,816 $ 52,753
Pro forma earnings per share:
Basic $ 1.43 $ 2.05 $ 1.35
Diluted $ 1.42 $ 2.04 $ 1.35
</TABLE>
NOTE EIGHT
SUPPLEMENTAL CASH FLOW INFORMATION
Net cash provided by operating activities in the consolidated statements of cash
flows reflects cash payments for interest and income taxes as follows:
<TABLE>
<CAPTION>
(In thousands) 1997 1996 1995
- ---------------------------------------------------------------------------------
<S> <C> <C> <C>
Interest $29,114 $ 26,192 $21,849
Income taxes 49,699 47,564 35,001
</TABLE>
30
<PAGE> 16
NOTE NINE
COMMITMENTS AND CONTINGENCIES
At January 3, 1998, the Company had commitments for the acquisition of property
and equipment totaling $44,887,000 and was committed under noncancelable
operating leases with initial or remaining terms of one year or more to minimum
rental payments aggregating $10,625,000, summarized by fiscal year periods as
follows: 1998 - $4,170,000; 1999 - $2,823,000; 2000 - $1,834,000; 2001 -
$1,481,000; and 2002 - $317,000.
The Company had $21,852,000 and $24,100,000 outstanding under letters of
credit for the purchase of inventories at January 3, 1998 and January 4, 1997,
respectively.
Lease and rental expense for fiscal years 1997, 1996 and 1995 was
$10,740,000, $11,558,000 and $11,273,000, respectively.
The Company is a party to licensing contracts that generally include minimum
royalty provisions. The length of these contracts, when signed, ranges from one
to seven years with the longest ending in January 2003. The Company's ability to
exceed the minimum royalties on these contracts is contingent upon meeting
certain sales levels over the next several years.
NOTE TEN
SEGMENT INFORMATION
The Company operates in a single business segment. Foreign and export sales were
approximately 11.0%, 10.5% and 9.8% in 1997, 1996 and 1995, respectively. All
revenues and expenses are allocated to geographical areas in determining income
from operations. Assets are specifically identified to the geographical area for
which they provide benefit.
<TABLE>
<CAPTION>
(In thousands) 1997 1996 1995
- ------------------------------------------------------------------
<S> <C> <C> <C>
Net sales
United States $ 1,092,582 $ 1,112,963 $ 1,040,084
Foreign 118,086 110,371 95,873
Export 17,530 20,870 16,676
Interarea transfers 5,923 7,787 4,678
Eliminations (5,923) (7,787) (4,678)
- ------------------------------------------------------------------
Total $ 1,228,198 $ 1,244,204 $ 1,152,633
==================================================================
Income from operations
United States $ 115,576 $ 150,220 $ 98,919
Foreign 2,704 4,059 7,533
- ------------------------------------------------------------------
Total $ 118,280 $ 154,279 $ 106,452
==================================================================
Identifiable assets
United States $ 1,113,297 $ 1,068,808 $ 1,015,420
Foreign 134,665 126,372 102,744
- ------------------------------------------------------------------
Total $ 1,247,962 $ 1,195,180 $ 1,118,164
==================================================================
</TABLE>
FASB Statement No. 131, "Financial Reporting for Segments of a Business
Enterprise," requires that financial information be reported at the same level
of segmentation that is used internally by the "chief operating decision maker."
The Statement is effective for fiscal years beginning after December 15, 1997.
The Company is in the process of evaluating the requirements of Statement No.
131 and has not determined what effect, if any, it will have on future
presentation of financial information.
NOTE ELEVEN
SUMMARY OF QUARTERLY RESULTS
OF OPERATIONS (UNAUDITED)
The following is a summary of unaudited quarterly results of operations:
Year ended January 3, 1998:
<TABLE>
<CAPTION>
Quarter ended
April 6 July 6 October 5 January 3
- -------------------------------------------------------------
(In thousands, except per share data)
<S> <C> <C> <C> <C>
Net sales $258,159 $270,273 $368,274 $331,492
Gross profit 82,011 78,067 115,118 95,471
Net income 11,303 8,113 23,234 11,798
Net income per
common share:
Basic $ .30 $ .22 $ .64 $ .32
Diluted $ .30 $ .22 $ .64 $ .32
</TABLE>
Year ended January 4, 1997:
<TABLE>
<CAPTION>
Quarter ended
March 31 June 30 September 29 January 4
- -------------------------------------------------------------
(In thousands, except per share data)
<S> <C> <C> <C> <C>
Net sales $257,854 $ 290,55 $336,679 $359,113
Gross profit 81,215 90,499 109,192 117,132
Net income 11,652 16,310 24,453 29,161
Net income per
common share:
Basic $ .30 $ .42 $ .64 $ .76
Diluted $ .30 $ .42 $ .63 $ .76
</TABLE>
31
<PAGE> 17
Russell Corporation and Subsidiaries
REPORT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
BOARD OF DIRECTORS AND SHAREHOLDERS
RUSSELL CORPORATION
We have audited the accompanying consolidated balance sheets of Russell
Corporation and Subsidiaries as of January 3, 1998 and January 4, 1997, and the
related consolidated statements of income, stockholders' equity and cash flows
for each of the three fiscal years in the period ended January 3, 1998. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the consolidated financial position of Russell
Corporation and Subsidiaries at January 3, 1998 and January 4, 1997, and the
consolidated results of their operations and their cash flows for each of the
three fiscal years in the period ended January 3, 1998, in conformity with
generally accepted accounting principles.
/s/ Ernst & Young LLP
Birmingham, Alabama
January 30, 1998
32
<PAGE> 1
EXHIBIT (21)
LIST OF SIGNIFICANT SUBSIDIARIES
Cross Creek Apparel, Inc. (incorporated in North Carolina)
DeSoto Mills, Inc. (incorporated in Alabama)
Russell Corp. UK Limited (organized under the laws of the United Kingdom)
IV-11
<PAGE> 1
EXHIBIT (23)
Consent of Ernst & Young LLP, Independent Auditors
We consent to the incorporation by reference in this Annual Report (Form 10-K)
of Russell Corporation of our report dated January 30, 1998, included in the
1997 Annual Report to Shareholders of Russell Corporation.
Our audit also included the financial statement schedule of Russell Corporation
listed in Item 14(a). This schedule is the responsibility of the Company's
management. Our responsibility is to express an opinion based on our audits. In
our opinion, the financial statement schedule referred to above, when considered
in relation to the basic financial statements taken as a whole, presents fairly
in all material respects the information set forth therein.
We also consent to the incorporation by reference in Russell Corporation's
Post-Effective Amendment Number 1 to Registration Statement Number 2-64496 on
Form S-8, Registration Statement Number 33-24898 on Form S-8, Registration
Statement Number 33-47906 on Form S-3, Registration Statement Number 33-54361 on
Form S-3, and Registration Statement Number 33-69679 on Form S-8 of our report
dated January 30, 1998, with respect to the consolidated financial statements
incorporated herein by reference, and our report included in the preceding
paragraph with respect to the financial statement schedule included in this
Annual Report (Form 10-K) of Russell Corporation.
/s/ Ernst & Young LLP
Birmingham, Alabama
March 25, 1998
IV-12
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
FINANCIAL STATEMENTS OF RUSSELL CORPORATION FOR THE THREE MONTHS ENDED
JANUARY 3, 1998 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
</LEGEND>
<RESTATED>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JAN-03-1998
<PERIOD-END> APR-06-1997
<CASH> 6,144
<SECURITIES> 569
<RECEIVABLES> 230,142
<ALLOWANCES> 9,211
<INVENTORY> 403,241
<CURRENT-ASSETS> 659,196
<PP&E> 1,124,059
<DEPRECIATION> 607,078
<TOTAL-ASSETS> 1,242,449
<CURRENT-LIABILITIES> 239,527
<BONDS> 255,921
0
0
<COMMON> 414
<OTHER-SE> 670,779
<TOTAL-LIABILITY-AND-EQUITY> 1,242,449
<SALES> 258,159
<TOTAL-REVENUES> 258,159
<CGS> 176,148
<TOTAL-COSTS> 176,148
<OTHER-EXPENSES> 56,434
<LOSS-PROVISION> 1,374
<INTEREST-EXPENSE> 5,872
<INCOME-PRETAX> 18,331
<INCOME-TAX> 7,028
<INCOME-CONTINUING> 11,303
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 11,303
<EPS-PRIMARY> 0.30
<EPS-DILUTED> 0.30
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
FINANCIAL STATEMENTS OF RUSSELL CORPORATION FOR THE SIX MONTHS ENDED JULY 6,
1997 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<RESTATED>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> JAN-03-1998
<PERIOD-END> JUL-06-1997
<CASH> 9,552
<SECURITIES> 662
<RECEIVABLES> 256,222
<ALLOWANCES> 11,558
<INVENTORY> 422,257
<CURRENT-ASSETS> 718,346
<PP&E> 1,140,584
<DEPRECIATION> 622,236
<TOTAL-ASSETS> 1,303,102
<CURRENT-LIABILITIES> 323,210
<BONDS> 257,052
0
0
<COMMON> 414
<OTHER-SE> 643,586
<TOTAL-LIABILITY-AND-EQUITY> 1,303,102
<SALES> 528,432
<TOTAL-REVENUES> 528,432
<CGS> 368,354
<TOTAL-COSTS> 368,354
<OTHER-EXPENSES> 112,522
<LOSS-PROVISION> 2,922
<INTEREST-EXPENSE> 13,084
<INCOME-PRETAX> 31,550
<INCOME-TAX> 12,134
<INCOME-CONTINUING> 19,416
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 19,416
<EPS-PRIMARY> 0.52
<EPS-DILUTED> 0.52
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
FINANCIAL STATEMENTS OF RUSSELL CORPORATION FOR THE NINE MONTHS ENDED
OCTOBER 5, 1997 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<RESTATED>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> JAN-03-1998
<PERIOD-END> OCT-05-1997
<CASH> 13,608
<SECURITIES> 823
<RECEIVABLES> 357,661
<ALLOWANCES> 12,248
<INVENTORY> 395,259
<CURRENT-ASSETS> 782,473
<PP&E> 1,153,296
<DEPRECIATION> 637,443
<TOTAL-ASSETS> 1,367,445
<CURRENT-LIABILITIES> 269,574
<BONDS> 360,618
0
0
<COMMON> 414
<OTHER-SE> 658,950
<TOTAL-LIABILITY-AND-EQUITY> 1,367,445
<SALES> 896,706
<TOTAL-REVENUES> 896,706
<CGS> 621,510
<TOTAL-COSTS> 621,510
<OTHER-EXPENSES> 181,706
<LOSS-PROVISION> 3,625
<INTEREST-EXPENSE> 20,669
<INCOME-PRETAX> 69,196
<INCOME-TAX> 26,546
<INCOME-CONTINUING> 42,650
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 42,650
<EPS-PRIMARY> 1.15
<EPS-DILUTED> 1.15
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
FINANCIAL STATEMENTS OF RUSSELL CORPORATION FOR THE YEAR ENDED
JANUARY 3, 1998 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> JAN-03-1998
<PERIOD-END> JAN-03-1998
<CASH> 8,609
<SECURITIES> 549
<RECEIVABLES> 253,521
<ALLOWANCES> 10,533
<INVENTORY> 369,923
<CURRENT-ASSETS> 647,043
<PP&E> 1,177,948
<DEPRECIATION> 651,835
<TOTAL-ASSETS> 1,257,962
<CURRENT-LIABILITIES> 145,612
<BONDS> 360,607
0
0
<COMMON> 414
<OTHER-SE> 665,188
<TOTAL-LIABILITY-AND-EQUITY> 1,247,962
<SALES> 1,228,198
<TOTAL-REVENUES> 1,228,198
<CGS> 857,531
<TOTAL-COSTS> 857,531
<OTHER-EXPENSES> 250,655
<LOSS-PROVISION> 3,495
<INTEREST-EXPENSE> 28,165
<INCOME-PRETAX> 88,352
<INCOME-TAX> 33,904
<INCOME-CONTINUING> 54,448
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 54,448
<EPS-PRIMARY> 1.48
<EPS-DILUTED> 1.47
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
FINANCIAL STATEMENTS OF RUSSELL CORPORATION FOR THE THREE MONTHS ENDED MARCH 31,
1996 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<RESTATED>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JAN-04-1997
<PERIOD-END> MAR-31-1996
<CASH> 4,973
<SECURITIES> 1,298
<RECEIVABLES> 231,781
<ALLOWANCES> 10,687
<INVENTORY> 361,414
<CURRENT-ASSETS> 607,421
<PP&E> 1,040,802
<DEPRECIATION> 547,415
<TOTAL-ASSETS> 1,167,485
<CURRENT-LIABILITIES> 168,850
<BONDS> 287,860
0
0
<COMMON> 414
<OTHER-SE> 637,622
<TOTAL-LIABILITY-AND-EQUITY> 1,167,485
<SALES> 257,854
<TOTAL-REVENUES> 257,854
<CGS> 176,639
<TOTAL-COSTS> 176,639
<OTHER-EXPENSES> 55,433
<LOSS-PROVISION> 1,138
<INTEREST-EXPENSE> 5,796
<INCOME-PRETAX> 18,848
<INCOME-TAX> 7,196
<INCOME-CONTINUING> 11,652
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 11,652
<EPS-PRIMARY> 0.30
<EPS-DILUTED> 0.30
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
FINANCIAL STATEMENTS OF RUSSELL CORPORATION FOR THE SIX MONTHS ENDED JUNE 30,
1996 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<RESTATED>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> JAN-04-1997
<PERIOD-END> JUN-30-1996
<CASH> 5,062
<SECURITIES> 560
<RECEIVABLES> 258,776
<ALLOWANCES> 11,977
<INVENTORY> 379,948
<CURRENT-ASSETS> 656,202
<PP&E> 1,069,854
<DEPRECIATION> 564,587
<TOTAL-ASSETS> 1,229,214
<CURRENT-LIABILITIES> 231,572
<BONDS> 277,392
0
0
<COMMON> 414
<OTHER-SE> 643,662
<TOTAL-LIABILITY-AND-EQUITY> 1,229,214
<SALES> 548,412
<TOTAL-REVENUES> 548,412
<CGS> 376,698
<TOTAL-COSTS> 376,698
<OTHER-EXPENSES> 111,533
<LOSS-PROVISION> 2,536
<INTEREST-EXPENSE> 12,040
<INCOME-PRETAX> 45,605
<INCOME-TAX> 17,643
<INCOME-CONTINUING> 27,962
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 27,962
<EPS-PRIMARY> 0.72
<EPS-DILUTED> 0.72
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
FINANCIAL STATEMENTS OF RUSSELL CORPORATION FOR THE NINE MONTHS ENDED
SEPTEMBERRR 29, 1996 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<RESTATED>
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> JAN-04-1997
<PERIOD-END> SEP-29-1996
<CASH> 5,230
<SECURITIES> 542
<RECEIVABLES> 330,256
<ALLOWANCES> 13,767
<INVENTORY> 368,444
<CURRENT-ASSETS> 712,408
<PP&E> 1,094,377
<DEPRECIATION> 580,927
<TOTAL-ASSETS> 1,294,166
<CURRENT-LIABILITIES> 294,186
<BONDS> 255,959
0
0
<COMMON> 414
<OTHER-SE> 664,81466
<TOTAL-LIABILITY-AND-EQUITY> 1,294,166
<SALES> 885,091
<TOTAL-REVENUES> 885,091
<CGS> 604,185
<TOTAL-COSTS> 604,185
<OTHER-EXPENSES> 171,255
<LOSS-PROVISION> 6,018
<INTEREST-EXPENSE> 18,936
<INCOME-PRETAX> 84,697
<INCOME-TAX> 32,282
<INCOME-CONTINUING> 52,415
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 52,415
<EPS-PRIMARY> 1.36
<EPS-DILUTED> 1.35
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
FINANCIAL STATEMENTS OF RUSSELL CORPORATION FOR THE YEAR ENDED JANUARY 4, 1997
AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
</LEGEND>
<RESTATED>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> JAN-04-1997
<PERIOD-END> JAN-04-1997
<CASH> 7,355
<SECURITIES> 549
<RECEIVABLES> 234,365
<ALLOWANCES> 10,210
<INVENTORY> 346,782
<CURRENT-ASSETS> 600,025
<PP&E> 1,122,721
<DEPRECIATION> 595,935
<TOTAL-ASSETS> 1,195,180
<CURRENT-LIABILITIES> 187,434
<BONDS> 255,935
0
0
<COMMON> 414
<OTHER-SE> 679,409
<TOTAL-LIABILITY-AND-EQUITY> 1,195,180
<SALES> 1,244,204
<TOTAL-REVENUES> 1,244,204
<CGS> 846,166
<TOTAL-COSTS> 846,166
<OTHER-EXPENSES> 237,733
<LOSS-PROVISION> 5,022
<INTEREST-EXPENSE> 25,738
<INCOME-PRETAX> 129,545
<INCOME-TAX> 47,969
<INCOME-CONTINUING> 81,576
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 81,576
<EPS-PRIMARY> 2.12
<EPS-DILUTED> 2.11
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
FINANCIAL STATEMENTS OF RUSSELL CORPORATION FOR THE YEAR ENDED DECEMBER 30,
1995 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<RESTATED>
<MULTIPLIER> 1,000
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0
0
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</TABLE>
